Rishi Sunak unveiled changes to furlough, self-employed support, Universal Credit and big decisions on taxes in his Budget today.
The Chancellor’s Covid spending has now hit £407bn including fiscal support but he warned “honest decisions” would have to be made.
Delivering his Budget to the nation, the Chancellor said the economy will not return to pre-Covid levels until mid-2022, but acknowledged this will not happen without business support amid mammoth unemployment.
The Chancellor confirmed an extension to business rates relief, a fourth and fifth self-employment grant, an extension of the £20 a week Universal Credit uplift and a stamp duty holiday boost.
Here’s everything the Chancellor announced in the Spring Budget 2021 and what it means for your money.
More than 700,000 people have lost their jobs since March and the economy has fallen by more than 10% – the fastest fall in more than 300 years.
Experts have warned this total could double from April, when the furlough scheme ends.
Today, Rishi Sunak said the furlough and self-employment income support schemes (SEISS) have been extended until the end of September.
Furloughed employees will receive 80% of their salary but businesses will be asked to contribute to their wages from the end of July as the recovery gathers pace.
As part of the plan to extend furlough, Sunak said employers must contribute 10% in July and 20% in August.
Sunak confirmed there will be a fourth self-employment grant, supporting workers affected by coronavirus restrictions from February 2021 until April 2021.
This will be paid at up to £7,500 or 80% of historic average profits over three months.
A fifth is also set to be detailed later in the year for people still out of work as lockdown is lifted.
This grant – most likely the last – will be paid in July, but be less generous.
It will still be worth 80% of average profits, but only for those whose turnover has fallen by 30% or more.
Those whose earnings have fallen by less will be entitled to 30% of profits up to a limit of £2,850.
More than 600,000 additional people, including many of the self-employed who previously missed out on grants will also get support for the first time.
That’s because those newly self-employed in the 2019-20 financial year will be able to apply for support for the first time.
The £20 weekly increase to universal credit payments will continue for a further six months, the Chancellor has announced.
Rishi Sunak said the benefit uplift introduced last April to mitigate the impact of coronavirus on families will remain in place until September.
It was previously due to end on March 31,
He said working tax credit claimants would receive equivalent support over the next six months through a one-off payment of £500, due to the way that system works operationally.
The number of people claiming universal credit in the UK has doubled since the start of the pandemic, surging from three million in March 2020 to six million at the start of this year.
Around 446 people were still making new claims every hour in the first week of 2021, and a total of 4.5million people have made a claim for the benefit since the start of the public health crisis.
Buy a house with just a 5% deposit
Earlier this week, the Chancellor unveiled a mortgage guarantee scheme to help Britons get on the housing ladder with small deposits.
Under the scheme, the Government will offer lenders a guarantee, incentivising them to boost the number of riskier 95% mortgages.
In his Budget speech today, Chancellor Rishi Sunak went a step further, revealing Lloyds, Santander, Barclays and HSBC have joined the scheme, offering government-backed mortgages for those with 5% deposits from April.
And others – including Virgin Money – would follow on shortly after, he said.
However critics have said in order to be effective, the scheme needs to tackle housing affordability problems.
Nigel Purves, chief executive of Wayhome, said: “The headline-grabbing 95% mortgage policy is politically astute, but it is a band-aid on a bullet wound.
“The affordability issue for renters goes much deeper than the deposit. Mortgage lenders calculate their lending by multiplying household income – and with the average house price in England coming in at just under £270,000, it means that you’ll need quite a hefty household income to get a 95% mortgage to afford to buy it.
“If the government is truly committed to turning Generation Rent into Generation Buy, it must work together with the property industry to raise awareness of innovative ways to help people take their first step onto the homeownership ladder.”
The Chancellor also announced a three-month extension to the stamp duty holiday for properties under £500,000.
The tax-break for properties worth less than £250,000 will apply until the end of September.
This means anyone house hunting or in the process of a sale is likely to benefit, with 45% of buyers between now and April to buy tax-free as a result.
However, be careful, as some property experts have warned it’s quietly pushing up prices as a result of supply and demand.
The extension applies to both house hunters and those already in a transaction.
Businesses will be able access a new “Recovery loan scheme” to replace the Bounce Back and coronavirus business interruption loan schemes.
Loans between £25,000 and £10million will be available with an 80% government guarantee.
The Chancellor has also unveiled a £5billion Restart Grant scheme that will provide Covid-hit firms up to £18,000 to boost their survival chances.
The cash injection will be aimed at retail, hospitality, accommodation, leisure and personal care firms. Non-essential retailers will be able to access £6,000 per business.
Business rates relief will also be extended for the hardest hit sectors, such as retail and hospitality for three months.
For the remaining nine months of the year, business rates will be discounted by two-thirds – a £6billion tax cut for firms.
VAT cut on holidays and takeouts
The VAT cut to 5% for the hospitality, accommodation and attractions sectors has been extended until the end of September.
The rate will then be 12.5% for a further six months.
This means consumers will get lower rates on coffees, takeaways and even days out – but the discount is discretionary so be aware of retailers trying to absorb the costs themselves.
Rishi Sunak also confirmed that income tax thresholds will be frozen until April 2026, after a planned rise next year.
The move will hit take home pay over the next five years.
Speaking during the Budget 2021, Sunak said the Treasury will freeze the amount of money that people can earn tax-free until 2026.
This will rise next year to £12,570, but will then be frozen for five years.
This also includes the threshold for the higher rate of income tax – the workers set to benefit most from the move.
“This government is not going to raise the rates of income tax, national insurance or VAT. Instead our first step is to freeze personal tax thresholds,” Sunak told parliament.
“We will, of course, deliver our promise to increase the personal allowance again next year to 12,570 pounds, but we will then keep it at this more generous level until April 2026.”
He added that the higher rate threshold would also increase next year to £50,270, as previously promised, but would then also be frozen for the same length of time.
Keeping these two thresholds on hold rather than raising them would mean more people are paying taxes as wages rise.
It is forecast that circa 800,000 people who would not otherwise pay income tax will become tax payers before the next General Election as a result.
For the first time, this top rate will include 23 and 24 year olds.
It will reach £8.36 for those aged 21-22; £6.56 for those aged 18-20; £4.62 for 16 and 17-year-olds and £4.30 for apprentices.
The new rates kick in on April 1.
However, there will be no pay rise for NHS workers who have to wait until later in the year, when pay reviews come back.
Cigarettes and alcohol
After a price rise on cigarettes last November, the Treasury said there will be no rise to tobacco duty from 6pm today.
But long-term plans say it will rise by RPI inflation plus 2%, so smokers will most likely take a hit later this year.
For pubs, it’s good news as beer duty remains frozen. All other alcohol duties – including spirits and whisky – have been frozen as well for the second year in a row.
The legal limit for contactless payments has officially risen to £100.
It is the second rise in the limit during the coronavirus crisis, and is only legally possible due to Brexit.
Sunak said: “As we begin to open the UK economy and people return to the high street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth.”
The limit went up from £30 to £45 last spring to discourage the exchange of cash during the pandemic.
The increase is expected to kick in later this year.
The government will extend and increase the payments made to employers in England that hire new apprentices.
Employers that hire a new apprentice between April 1, 2021 and September 30, 2021 will now receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.
According to the Budget document, this is in addition to the existing £1,000 payment the government provides for all new 16- to 18-year-old apprentices and those aged under 25 with an education, health and care plan where that applies.
A further £126million will go towards funding 40,000 new traineeships in England.