Here is a summary of the Chancellor Rishi Sunak’s Budget:





Here is the latest update of tax rates and allowances:



Income tax allowances frozen

The Budget saw the Chancellor announce that as of April, there will be a freeze on the amount of money employees earn before paying income tax at £12,570, with this to continue until the middle of the decade. The Office for Budget Responsibility estimates that the move will see an extra 1.3m people start to pay income tax by 2026. The level at which employees start paying the higher rate of tax will be frozen at £50,270, with an extra 1m people set to fall into the 40% band within five years as a result. The policy will bring an extra £8bn a year for the Treasury, analysis suggests. Iain McCluskey of PwC calculates that freezing the personal allowance will impact low earners who may currently be under the threshold. Meanwhile, the Chancellor also announced that inheritance tax thresholds, pensions lifetime allowances and annual capital gains tax exemptions are to be frozen at 2020/2021 levels until 2025/26. Several papers note that the freezes to personal allowances will see the tax burden increase to its highest level since 1969, hitting 35% of GDP, while Blick Rothenberg said the freezes mark “a clear tax rise for all taxpayers”.

The Daily Telegraph, Page: 4 The Daily Telegraph, Page: 1 The Times, Page: 1 The Times, Page: 2 Financial Times, Page: 1 Financial Times, Page: 10 The Guardian, Page: 1,4 Daily Mail, Page: 10 The I, Page: 15 Daily Mirror, Page: 12 Daily Express, Page: 5 Daily Star, Page: 2 BBC News BBC News

Corporation tax lifted to 25%

The headline rate of corporation tax will rise from 19% to 25% from 2023, the Chancellor has announced, an increase he says is necessary to make public finances sustainable in the long-term. Mr Sunak said he wanted to reduce borrowing by raising more tax revenue rather than by cutting public spending, adding: “The only other alternative would be to increase the rates of tax on working people, but I don’t think that would be right”. He also announced that businesses with profits under £250,000 will be spared the increase, seeing a 19% rate instead. EY’s Chris Sanger said the Chancellor “seems to be focusing on small rather than small and medium-sized businesses”. Meanwhile, PwC’s Jon Richardson said that following years of a declining headline corporation tax rate, Mr Sunak’s “hand has clearly been forced” by the pandemic and the strain on public finances. KPMG analysis shows that the 25% rate exceeds the EU average of 21.7% but is lower than the US’ 27% and Japan’s 30.62%.

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No penalty for one-off late filing

A move to make rules around filing of tax returns “fairer and more consistent” was announced as part of the Budget, with those filing returns late on a one-off basis now set to be spared HMRC’s £100 penalty. The new system, which will be introduced for VAT taxpayers from 2022 and for those filing income tax self-assessments from 2023, will see heftier penalties for repeat offenders than the current rules. The Budget Red Book said: “The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is.” The Government will legislate the shift in the Finance Bill 2021, with the reform forecast to raise £5m in 2022/23, £90m in 2023/24 and £155m in 2024/25 and 2025/26. Meanwhile, a crackdown on evasion and avoidance is expected to raise £2.2bn by 2025/26. BDO’s Dawn Register comments that catching tax cheats will help repair public finances, although RSM’s George Bull fears the increased tax take from the crackdown will “not be a game-changer”.

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Tax break concern over super-deduction

Under a new tax “super-deduction” detailed in yesterday’s Budget, companies investing in new plant and machinery assets will be able to deduct 130% of the investment from their taxable income for the next two years. This means they would be able to cut their tax bill by up to 25p for every £1 that they invest. PwC has suggested the move may boost “levelling up” as manufacturers are more concentrated outside London and the south-east. However, Labour’s Dame Margaret Hodge suggested the way the tax was structured was a “big concern”, saying that the “devil will be in the detail” as it appears the initiative may be “little more than a tax break” for Amazon and other tech giants. The Telegraph notes that an online sales tax may still be put in place to target such firms, with Mona Bitar of EY suggesting “greater certainty is needed in this area” .

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Hospitality sees VAT cut extended

The 5% reduced rate of VAT for the hospitality sector will continue for another six months, the Chancellor has announced. Rishi Sunak told the House of Commons the reduced rate would be extended until September 30. He also announced there will be an interim rate of 12.5% for another six months until April 2022. In total the move will see VAT cut by around £5bn. Christian Mole of EY warned that the sector will face challenges, even as restrictions are lifted, calling for ongoing Government support and describing the sector-specific support being offered as “encouraging”.

BBC News City AM

Tax rethink for banks on the cards

The Government is due to roll back a surcharge on banks’ corporation tax to help to boost the sector’s competitiveness, with a review of tax on banks coming in the autumn. The move could see banks brought closer in line with other sectors where corporation tax will rise to 25% from 2023. Without reform, banks could face a rate of around 33%. Isabelle Jenkins of PwC said banks will welcome the Government’s review of the sector’s tax burden, while Richard Milnes at EY noted: “It seems that banks should still brace themselves for an overall increase in tax on profits from 2023.”

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New freeports confirmed

The Chancellor has announced the eight English that are to be designated as freeports, claiming that policy for the low-tax areas will be “on a scale we’ve never done before” and will “exemplify the future economy”. East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City, Plymouth, Solent, Thames and Teesside have all been chosen. The freeport model allows companies to import goods tariff-free, with critics suggesting they can act as tax-avoidance sites for the wealthy. Questions have been raised over regulation and governance, with concerns over whether the tax breaks could breach trade agreements.

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Three-months added to business rates holiday

The business rates holiday rolled out to support firms during the pandemic has been extended for another three months, with the break, which had been set to run for a year and conclude at the end of the month, now running until the end of June. Real estate adviser Altus Group said the cost of extending the relief will be around £3bn. With some retailers having been criticised for accepting business rates relief despite being able to remain open under lockdown rules, a number of big chains last year committed to repaying £2.2bn of the support. Following yesterday’s announcement of the three month extension, Tesco, Sainsbury’s, Asda and Morrisons said they would not take advantage of the relief.

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Stamp duty holiday to continue

The stamp duty holiday has been extended by six months until the end of September, an extension that includes a tapering of support, with the nil-rate band gradually lowering from June. The extension applies to all transactions in England and Northern Ireland, meaning buy-to-let investors will continue to benefit from the tax savings. The deadline for buyers to take advantage of the higher £500,000 nil-rate band has been extended by three months. This means that buyers can save up to £15,000 in tax if they can complete their sales by June 30. After this date, the nil-rate band will drop to £250,000 until September 30, with the maximum tax savings falling to £2,500 during this period. From October 1, the nil-rate band will fall back to its original level of £125,000. On the extension, Sean Randall, a partner at Blick Rothenberg, said: “Buyers due to complete between April 1 and June 30 will breathe a sigh of relief; estate agents, surveyors and mortgage brokers will rub their hands with glee; and conveyancers, exhausted by the pressure to complete before April 1, will look ahead with dread.”

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OBR: Stamp duty holiday will lift prices

The Office for Budget Responsibility (OBR) expects the extension of the stamp holiday to “result in some additional transactions and raise house prices a little” – but added that house prices will fall back again as pressure on the labour market increases. While house prices are forecast to climb 5.1% over 2021 and then slip 1.7% in 2022, the OBR expects growth of 0.8% in 2023, 3.9% in 2024 and 4.3% in 2025. The analysis suggests that house prices will be 13.5% higher at the beginning of 2025 than they were at the start of 2020. A November report from the OBR predicted that growth in the period would be around 11.4%.

The Daily Telegraph

Lenders back loan support plan

Britain’s biggest mortgage lenders have backed a Government scheme to help people get on the property ladder, with Lloyds, NatWest, Santander, Barclays and HSBC among the banks agreeing to offer 95% mortgages to creditworthy customers from next month. The initiative will see the Government guarantee part of the loan, compensating the bank in the event of repossessions. David Farr at Grant Thornton said that the scheme was likely to “prop up demand and therefore house valuations”, while Howard Archer of the EY Item Club said he was worried about a housing market correction later this year or next year that could leave buyers in negative equity.

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Furlough extension confirmed

Chancellor Rishi Sunak has confirmed that the furlough scheme, which was due to end in April, will be extended to the end of September. The extension will mean the Government will continue to contribute 80% towards wages to help firms keep staff on the payroll. As of July, employers will start paying 10% of furloughed employees’ pay, with this increasing to 20% from August. It was also announced that a fourth round of self-employment grants will help support those left out of previous support because they had not filed tax returns. The fresh round of grants, which will be worth up to £7,500, will see support for an additional 600,000 people. The Office for Budget Responsibility expects the cost of the furlough scheme to be £10.8bn extra between April and September.

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UK staff take fewer sick days in 2020

Figures from the Office for National Statistics (ONS) show that workplace absences due to illness fell in 2020. The UK’s sickness absence rate declined from 1.9% to 1.8% last year – the lowest level since its records began in 1995. The ONS said that coronavirus lockdowns, restrictions and social distancing rules in the workplace may “have led to less exposure to germs and minimised some of the usual sickness absences”. It added: “Homeworking could allow people to work from home when they were a little unwell … they might not have travelled to a workplace but feel well enough to work from home.” The report shows 118.6m working days were lost because of sickness or injury in 2020, equating to 3.6 days for each worker.

The Guardian

Apprentice cash doubles

Payments to employers that take on apprentices are to be doubled, with employers to receive £3,000 for each new apprentice they hire between April and September. KPMG’s Shashi Prashad believes the doubling of the grant could stimulate new jobs and Zlatina Loudjeva of PwC said the Chancellor “has pulled some of the most immediate levers available to get people back into work.”

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Sunak reveals ‘restart’ grants

Retail, hospitality and personal care businesses, which are set to reopen from April as coronavirus restrictions are eased, are to be offered support in the form of the new Restart Grant. The Chancellor announced that retailers will be eligible for grants of up to £6,000 per premises, while pubs, restaurants and salons, which will be closed until June, will be able to claim grants of up to £18,000. Detailing the support in his Budget announcement, the Chancellor said the new grants will total an extra £5bn of help. He added that this takes the Government’s direct cash support to business to £25bn.

City AM


German regulator files complaint against Greensill Bank

Germany’s financial watchdog BaFin has reportedly filed a criminal complaint over suspected balance sheet manipulation at Greensill Bank. A probe by BaFin found irregularities over how the bank had booked certain assets, with the watchdog tasking KPMG with performing a forensic investigation last year. The probe found that Greensill had booked claims for transactions that had not yet occurred but which were accounted for as if they had been.

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Deloitte strikes $80m Malaysian settlement over 1MDB

Deloitte has agreed an $80m settlement with Malaysian officials over its role as an auditor to scandal-hit state investment fund 1Malaysia Development Berhad.

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Vaccines to drive economic recovery, says OBR

The Office for Budget Responsibility (OBR) says the UK’s coronavirus vaccine programme will help drive a “swifter and more sustained” economic recovery, with the Government’s independent forecaster saying it expects growth of 4% this year and 7.3% in 2022. The latter would mark the highest growth rate since official records began and see the economy hit its pre-pandemic level by the middle of next year – six months earlier than previously estimated. The OBR analysis noted that British households have built up savings of around £180bn in the past year, with it forecasting that around a quarter could be spent once coronavirus-related restrictions are lifted, pointing to a potential “degree of euphoria” among consumers. It also warned that economic uncertainty remained “considerable”. The OBR also said unemployment is set to peak at 6.5%, considerably lower than the 11.9% expected last July.

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Budget response

Reflecting on the details of yesterday’s Budget, Labour leader Sir Keir Starmer said the scale of what the Chancellor announced “is nowhere near ambitious enough”, saying the measures are “a quick-fix, papering over the cracks”. Ian Blackford, the SNP’s leader at Westminster, said the measures are “carefully laying the ground for more Tory austerity”, while Plaid Cymru said it was a “Budget of half measures and quick fixes”. Meanwhile, Institute for Fiscal Studies director Paul Johnson said the overall tax burden is set to hit its “highest sustained level in history.” Separately, Chris Sanger, head of tax policy at EY, described the Budget as “three years of support, followed by three years (and more) of pain”, adding “that time is the Chancellor’s friend in his aim of replenishing the Government’s coffers.” The FT’s Merryn Somerset W ebb says all taxes that affect income and wealth “are set to rise substantially in real terms”, while Iain Martin in the Times says Rishi Sunak “earmarked tax rises when the focus should be wholly on dynamism”.

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Contact Paul Southward

Paul Southward