The Chancellor of the Exchequer, Rishi Sunak, set out the Budget 2021 for the UK economy on March 3rd 2021.
For the textiles industry, the freeze on National Insurance and VAT may come as a relief, particularly for the leisure and hospitality sectors. However, VAT will return to the standard rate of 20% in April 2022.
Addressing the governments plans to reopen non-essential businesses, the Chancellor outlined a new Restart Grant in April, which will give non-essential retails businesses up to £6,000, whilst hospitality and leisure businesses will receive grants of up to £18,000.
The Chancellor stated that Corporation Tax is set to increase to 25% from 2023, but income tax thresholds will freeze as part of the government’s plans to revive the economy. The rate of Corporate Tax will remain at 19% for companies earning under £50,000 p/a, whilst businesses earning over £250,000 at 25%.
The Job Retention Scheme, know as furlough, will be extended until the end of September 2021. This means that the government will continue to pay 80% of people’s wages. Sunak announced that an extra 600,000 self-employed workers will qualify for government help, widening the access to grants.
The pandemic “fundamentally altered” people’s lives, said the chancellor, with over 700,000 people losing their jobs and the economy shrinking by almost 10% last year whilst borrowing has increased. The economy “will recover”, Sunak continued, and that the government will facilitate recovery by remedying public finances.
In total, Rishi Sunak stated that the government has announced an additional £65 billion of measures to support the economy.
“Taking into account the significant support announced at Spending Review 2020, this means our total Covid support package, this year and next, is £352bn.”
Further measures include an increase on the limit of contactless spending from £45 to £100 and the opening of eight ‘freeports’ in England with cheaper customs, lower tariffs and VAT or duties.
Further to this, the Chancellor pledged £5 billion to help high street business re-open after the lockdown and £150 million to support pubs which are at risk of closing.
With an official decrease in tax income, the government is expected to borrow £394 billion in the current financial year, the highest figure ever seen in peacetime conditions.
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