Budget 2021

Chancellor Rishi Sunak delivered his budget on 3rd March 2021. With government borrowing having reached £315bn this year, this has pushed the national debt to £2.13 trillion. Borrowing has now reached 16.9% of GDP the highest peacetime borrowing on record. We anticipated huge reforms to tax to recoup the cost of the COVID-19 pandemic but this was not delivered as anticipated.

The key message from this budget was the continued support to businesses and some self-employed be the extension of the furlough scheme and business grants.

The availability of the Job Retention Scheme has been extended until September 2021, but with some changes effective from 1 July. Employers will be expected to pay 10% towards the cost of employee unworked hours in July, which will increase to 20% in August and September.

From 6 April, a Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible business loans between £25,000 and £10m. This will ensure that lenders have the confidence to continue to offer finance to businesses, and to those businesses who have already received support from the guaranteed loan schemes to date.

For all those non-essential retail businesses who have had to remain closed during this lockdown there will be a Restart Grant available of up to £6,000 per premises to enable them to plan ahead and to relaunch trading over the coming months. A grant of up to £18,000 per premises is available for businesses in the hospitality, accommodation, leisure, personal care and gym industries.

Other incentives include the continuation of the Statutory Sick Pay Rebate Scheme; the extension of temporary reduction in VAT at 5% for good and services supplied by the tourism and hospitality sector; 100% business rate relief in eligible properties in the hospitality and leisure industry and a VAT Deferral Payment scheme for those who deferred their VAT returns from 20 March 2020 to June 2020.

As to the self-employed who have generally not fared as well as companies during the pandemic; the fourth grant of the Self-Employed Income Support Scheme worth up to 80% of 3 months average trading profits capped at £7,500 can be claimed from April on the proviso that a 2019/20 self-assessment has been filed. A fifth and final grant will also be available from late July which will be determined by a turnover test. If turnover has fallen by 30% or more then the full grant worth 80% of 3 months average trading profits will be available but capped at £7,500.

Stamp duty

Good news for the housing market, with the extension of the temporary increase in residential stamp duty land tax nil rate band of £500,00 in England and NI until 30th June 2021. From 1 July, the nil rate band will reduce to £250,000 until 30 September and return to £125,000 from 1st October 2021.

In Wales, the Welsh Government quickly followed with an announcement of their extension of the temporary increase in the nil rate band of the Land Transaction Tax until 30 June 2021. But there will be no transition arrangement as seen in England and NI. Up to 30 June 2021, the LTT will be up to and including £250,000 and from 1 July this will revert to £180,000.

In the Scottish Budget early in the year (Jan 21) it was announced that the nil rate band for residential Land and Buildings Transactions (LBTT) will return to £145,000 from 1 April 2021. But first-time buyers will continue to be able to claim first time buyer relief which effectively increases the nil rate band to £175,000.

Mortgage guarantee

In addition, as was publicised in the press in advance of the Budget - the chancellor announced a new mortgage guarantee to support lender’s reintroducing 95% LTV mortgages back into the market. With lots of lenders playing hokey kokey with 90% LTV products throughout the pandemic the risk appetite of lenders hasn’t been prevalent to offer 95% LTVs. But with the new mortgage guarantee underpinning 80% of the purchase value, with the lender taking a 5% share of the net loss, this has whetted the appetite of a few key lenders with  new products available in the next month or so. It will be interesting to see what interest rates will apply on these products.

The products coming to market will be available to first time buyers and existing home owners but not incorporated companies. The products offered will be on a residential mortgage and not second homes or buy to let properties, located in the UK with a purchase value of £600,000 or less. The mortgage will be in a repayment basis and not interest only.

The usual rules will still apply as to the creditworthiness of the applicants to the mortgage so the current affordability assessments will continue to be undertaken. 

Pensions and investments

Although we anticipated widespread changes to the Capital Gains Tax regime and potential further pension reform; this did not come to fruition in this budget. In general current allowances across the board have been frozen.

With the Lifetime Allowance frozen at £1,073,100 until April 2026 this means more pension savers are likely to be affected by the LTA. This will therefore increase the planning opportunity for financial advises active in this space.

And finally...

Last but not least there was bad news for our children who have just returned to school this week; the Chancellor announced a further £700m of funding to support young people in England to catch up on lost learning. This includes £200m for secondary schools to deliver face-to-face summer schools. I’ll break the news gently to my teenager!