Chancellor Rishi Sunak has outlined a new £65bn support package in his March budget, confirming the decision to extend the furlough scheme until the end of September as well as new loan schemes of up to £10m for businesses.
In what is Sunak’s second budget since he joined office in 2020, the chancellor said that despite a record £280bn of financial support to date, the damage coronavirus has caused has been “acute”.
The raft of support measures includes the extension of the furlough scheme, which will now be extended until the end of September, as Sunak said that “protecting, creating and supporting” jobs remains his highest priority. The scheme will remain unchanged until July when the government will then ask firms to contribute 10% in August and 20% in September.
The government will also provide a new restart grant scheme, with hospitality and leisure businesses receiving upwards of £18,000 and non-essential retail receiving up to £6,000 per premises.
A new recovery loan scheme will also allow businesses of any size to apply for loans of £25,000 to £10m until the end of the year, with the government covering lenders of up to 80%.
Noting that hospitality and tourism businesses need continued support, the chancellor also confirmed that the 5% VAT cut will now be extended until 30 September, moving to an interim rate of 12.5% until April of next year.
In his latest budget speech, the chancellor also confirmed that corporation tax will increase to 25% in April 2023 in order to help finance the new measures. However, only 10% of companies, with profits of over £250,000, will pay the full 25% rate due to a £50,000 tax taper.
Small businesses, with profits of £50,000 or less, will be protected from the tax hike due to a Small Profits Rate, which will be maintained at the current rate of 19%.
The chancellor also announced a new ‘pro business tax regime’ in a bid to encourage more businesses to “invest right now”, as part of the scheme when companies invest they can reduce their tax bill by a “super deduction” of 130%.
Further measures announced by the chancellor:
- Support for the self employed will also continue until September, with a fourth, fifth and final grant. Those whose turnover has fallen by 30% or more will receive the full 80% grant, while those below will receive 30%, and over 600,000 more people can now claim the fifth and sixth grants provided they filed their tax returns by the passed deadline.
- The chancellor also confirmed that the National Living Wage will rise to £8.91 form April, while a weekly universal credit uplift of £20 will remain in place until September.
- Planned increases in duties for spirits, wine, cider and beer will be cancelled, with all alcohol duties frozen for a second year in a row.
- Contactless payments will more than double from the current £45 threshold to allow payments of up to £100.
- A one-off payment of £500 for tax credit claimants in order to provide further financial support over the next six months.
- An additional £300m to be added to the government’s £1.57bn Culture Recovery Fund. Museums and cultural bodies in England will obtain £90m with a further £18.8m for community cultural projects, and £77m will be allocated for “similar initiatives”.
- Sports will also benefit, as cricket, tennis and horse racing will receive a £300m recovery package, with £25m worth of funding set to support football.
The budget comes as the Office for Budget Responsibility (OBR) released statistics forecasting unemployment to peak at 6.5%, down from the over 11% predicted in July 2020.
Furthermore, the OBR predicted the economy will grow by 4% over 2021, with a 7.3% rise in 2022, then a subsequent 1.7%, 1.6% and 1.7% in the following three-year period. The economy is now predicted to return to pre-Covid levels by the middle of 2022 – six months earlier than previously estimated.