UK Budget 2021: What will it include?
Intro: This year’s UK Budget to be announced on 3 March is expected to be a recovery plan for
the sectors battered due the coronavirus-led uncertainties. Much of the economy remains
paralysed by coronavirus. In 2020, the GDP shrank by 9.9 per cent, which is the sharpest
decline in 300 years. In between October and December 2020, the economy grew 1 per cent.
A few quick points on what Chancellor Rishi Sunak may consider for his budget statement.
Fiscal outlook
There is an immediate need to rebuild the public finances,
for which Sunak needs a roadmap to ascertain support schemes for various sectors.
According to the Office for National Statistics, the government borrowing
stood at £270.8bn for April to December 2020,
which is £212.7bn more than what it was in the corresponding period for 2019.
Sunak is also expected to focus on the UK’s regions and provide measures to boost
productivity, enable skills development, and encourage regional businesses separately.
Pandemic support measure
All eyes are set for the major support schemes such as the -- furlough scheme
and the business loans. Both these might get extended.
The ‘Eat Out to Help Out’ scheme may be reintroduced to help the hospitality sector.
An extension to the Stamp Duty holiday is also expected.
Last July, the Stamp Duty holiday provided
tax exemption for housing properties on the first $500,000 spent.
Corporate tax
An increase in corporation tax is on the cards
though experts are debating whether the time is right or not.
The corporation tax is almost 6% of the total tax receipts.
This year, the government may take a more targeted approach and raise tax for
only those businesses that have remained profitable in the pandemic.
Income tax
Sunak has said that he would raise the personal allowance and basic rate band in
accordance with the inflation as per the 2020 Spending Review.
This would reduce the income tax by £68 for each taxpayer.
Capital Gain Tax
As per HMRC estimates, if CGT rates are increased by
1%, it would bring an £175 million per year.
If the rates are increased, each taxpayer will have to pay £700 extra each year.
Business rates
The Government has already agreed to freeze the Business Rates multiplier for 2021/22,
so some bills will remain same as before.
There was a proposal to supplement the Business
Rate by possible introduction of online sales tax.
VAT
Sunak is expected to make a short extension to the VAT,
which was reduced in 2020 for the hospitality sector.
Climate change
Experts have said that this budget Sunak will address
climate crisis and will plan Net Zero goals for businesses and individuals.
With COP26 later this year, the Boris Johnson government
will take up green action, and may introduce carbon tax depending upon the business.