The Chancellor, Rishi Sunak, will deliver his second budget to the House of Commons on 3rd March 2021. It will be almost a year after the last budget took place on the 11th of March 2020. There was a Budget scheduled for September 2020 but it was cancelled.
Here we look at some of the latest rumours and what is expected to happen. What we do know for sure is that the COVID pandemic has caused untold damage to the UK economy. COVID-related support is likely to be at the forefront of Sunak’s budget.
There have been strong rumours that the first budget of 2021 will be a ‘giveaway budget’. It is thought the budget will be positioned to help kickstart the economy and trigger a post-lockdown boom. The Chancellor will also need to look at ways to balance the country’s budget following the extraordinary spending and borrowing due to COVID. Following Boris Johnson’s Roadmap’ speech on 22nd February, he announced lockdown restrictions until June 2021 at the earliest.
On a positive note, these restrictions will start to relieved in March. The Prime Minister also alluded to the fact the Chancellor will use the budget to extend current COVID-support initiatives. Here are some of the key areas we expect to be covered:
Extension of the Furlough Scheme
The Furlough scheme is due to end on April 30th. It is widely expected the scheme will be in place until lockdown restrictions are fully lifted. With June being earmarked as the month where restrictions will be eased, we expect the scheme to be in place until the summer.
Extension of Universal Credit Uplift
At the start of the lockdown, the Chancellor introduced a temporary uplift of £20 a week to Universal Credit. This has helped many people from being plunged into poverty. It is expected to be extended for 6 months.
Extension of Stamp Duty Relief
The Chancellor is expected to extend the Stamp Duty initiative for at least 3 months, until June 2021. It was expected to end on 31st March. The Stamp Duty threshold has currently been increased from £125,000 to £500,000. This is expected to benefit approximately 300,000 property purchases.
Additional Support for the Self-Employed
The self-employed grant pays approximately 70%-80% of usual profits over a three-month period. We are currently in the middle of the fourth grant period without confirmation of who is eligible and how much can be claimed. It is expected the Government will use the Budget to provide clarification around this.
Tax-Free Personal Allowance Freeze
The personal allowance currently stands at £12,500 which is usually increased in line with inflation. Rumours strongly suggest this will be frozen and will remain the same in this Budget. This is one area the Chancellor will look to balance the books in the future, by reducing this threshold.
We have previously discussed the introduction of this. It is too early to implement such a tax, but expect to see recommendations for the consultations on the topic soon.
Capital Gains Tax
CGT, as it’s otherwise known, is expected to be reformed in some way. The Office for Tax Simplifications was asked to look at ways it could be reformed in 2020. This therefore suggests changes are coming. Whether it comes in this Budget or the Autumn Budget remains to be seen.
Other Areas To be Covered
We expect the Budget to be a significant and extensive one. We also expect the Chancellor to cover Corporation Tax, Council Tax, Pension Tax Relief, Class 4 National Insurance, Credit / Debit Card contactless payment limit, Lifetime ISA Penalty and Assistance for victims of the Cladding scandal.
Rabbit in a Hat?
The Chancellor often announces a surprise at the end of a Budget. This is known as the ‘rabbit in the hat’ moment. After the summer statement he announced the ‘Eat Out to Help Out scheme’. This was aimed at injecting confidence and money into the hospitality sector. The hospitality sector is certainly one that needs stimulus again. Let’s hope he pulls out an appealing ‘rabbit in the hat’ in the 2021 Budget.
We look forward to hearing what will be announced on 3rd March. We hope whatever is announced will help the economy on it’s road to recovery. We also hope it offers much-needed support to the many people across the UK who have been impacted by the COVID pandemic.
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