The Budget: What You Need To Know.
The Budget: What You Need To Know.
By Jaysen |
What is it?
Once a year, the Chancellor of the Exchequer (the person in charge of the UK's finances) makes a statement. In that statement, they discuss the state of the economy and outline plans for taxes and spending. That's the Budget.
This year is particularly unique given the size of the government's borrowing, the highest since World War II. There were lots of questions leading up to this budget: Should we raise taxes or cut spending - or both? How are we going to kickstart the economy?
The Budget: Key Points for Businesses
Taxation
- Corporation tax is going up from 2023. Notably, this only applies to companies with over £50,000 in profit, which will see a staggered rise in taxation from 19% to 25%. The highest rate will apply to companies with more than £250,000 in profit. This is a huge tax jump for the most profitable UK companies. For those near the threshold, expect plenty of 'engineering' to reduce profits.
- Termed a 'super-deduction', until March 2023, companies will be able to reduce their taxable profits by 130% (rather than 100%) by investing in qualifying plant and machinery. Alongside the ability to carry back losses, this appears to be an attempt by the UK government to incentivise investment over sitting on cash.
- A new Taxpayer Protection Force, comprising of over 1,000 HMRC representatives, has been established to crack down on Covid-related fraud.
- The mortgage guarantee scheme aims to help young people get onto the property ladder. Lenders who provide mortgages to people with a deposit of 5% will benefit from a government guarantee. However, alongside the ongoing stamp duty cut, this policy risks pushing up house prices even further. In response to the announcement, shares in housebuilders rose (Proactive).
- The furlough scheme will continue until September 2021. From July, employers will start making contributions (10% in July and 20% in August and September).
- The 5% VAT rate for the hospitality industry has been extended until September 2021. It will then make a staggered return back to the normal rate of 20% in April 2022.
- The limit on contactless payments will rise to £100, an action made possible by the UK leaving the EU.
- Businesses in retail, hospitality and leisure will also benefit from a continued relief on business rates and grants of up to £18,000.
- A series of initatives have been introduced to boost the UK's technological capabilites. This includes a new fund, 'Future Fund: Breakthrough', which will invest in fast-growing technology companies, a new fast-track visa, and proposals to make the UK more attractive for Initial Public Offerings. This follows Rishi Sunak's ambitions to boost the UK's global competitiveness of UK technology startups (Yahoo Finance).
- The 'Help to Grow' scheme will provide management and digital skills training to small and medium businesses (SMEs) in the UK. This appears to be a bid to boost the UK's productivity (output per given input), which has arguably been lagging behind (The Guardian).
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