Rishi Sunak today promised that the UK economic recovery will be “swifter and more sustained” than thought.
This however will come at a price for some business owners and employees who get a pay rise.
Here is a summary of the main points the chancellor announced about his budget.
1: It’s the big one for businesses. Corporation tax is going to increase from 19% to 25% in 2023. For small businesses whose profits are lower than £50k, they will still pay the lower rate. Sunak insists even with the rise, it’s a lower rate than many other countries.
2: Income Tax thresholds are set to freeze once the newest updates are implemented until 2026. This means employees with a pay rise could find themselves budged into a new tax bracket, and paying more tax.
3: The Furlough scheme is set to be extended until the end of September, with employers being asked to contribute 10% in July and 20% in August. This is a welcomed move, but likely means unemployment will rise when the scheme ends. However, Sunak says it’ll likely peak in 2022 at 6.5% which is lower than the 11.9% forecast.
4: The self-employment grants have been opened up to newer businesses who have filed their 19/20 tax return. This is about an extra 600,000 people who will be able to access grants number 4 and 5.
5: Business rate relief is in place until June – then discounted for some time.
6: Non-essential retail will be able to claim up to £6k grant – Personal Care and Leisure up to £18k. This takes into account the amount of time they haven’t been able to trade.
7: Minimum wage will be increased to £8.91 from April.
8: Stamp Duty Cut will stay in place until the end of June. Sunak says this is because of the sheer amount of people taking advantage of the scheme. The threshold will then be £250k instead of the usual £125k for some time. The Chancellor has also promised more help for first-time buyers, with many high street banks lending 95% mortgages, backed by the government.
9: Reduced VAT rate of 5% for hospitality and tourism extended until the end of September.
Whilst the budget has aimed to help many in the short term, it is clear that the economic damage is severe, and in Sunak’s words, will take “many more governments” over many more years to repair.
With the countries borrowing only ‘comparable with the two world wars’, it looks like businesses are going to need to adapt and prepare for some pricey hikes.