Budget 2021: Reactions & Key Takeaways
Chancellor Rishi Sunak has announced his economic plan aimed at helping the UK to recover from the COVID-19 pandemic, promising to "protect the jobs and livelihoods of the British people". Among some of the main points are an extended furlough scheme (until September 2021) and Sunak’s plan to increase the tax on large company profits from 2023. We take a look at some of the key takeaways from his spending plan for the new year below.
Chancellor Rishi Sunak has unveiled a major tax hike in the 2021 budget – with corporation tax on company profits rising by 6% to 25% in 2023. Darren Upson, VP Small Business Europe at Soldo has commented: “While the Chancellor understandably needs to raise revenue to pay off the eye-watering amounts of cash borrowed throughout the course of the pandemic, we nonetheless worry about the timing of these tax hikes. In the context of Brexit, the government needs to ensure the UK remains an attractive destination for business. The last thing it ought to be doing is risking putting off investors and entrepreneurs with what may be perceived as a punitive tax regime. Another crucial concern is that these tax hikes may discourage SMBs from hiring. With unemployment creeping up, this move could ultimately prove to be counterproductive.”
Melissa Christopher, Executive Director at ZEDRA, argues the opposite:
”While the corporation tax rate increase is disappointing, it was inevitable that tax rises would happen and it primarily affects groups of companies that are profitable. The revised loss rules will help those companies who have struggled during the pandemic and will take a couple of years to recover.
“We rarely welcome tax increases, but tax certainty is helpful for international businesses as they plan their own budgets and revise business arrangements in the recovery period. The fact that the increase is not until 2023 will allow sensible business planning. No group should be making decisions on headline tax rates alone, and now is perhaps the best time to make reasoned and educated assessments of long-term expectations.
“International companies looking to expand to Europe will look at the UK as a successful economic location, with a motivated and educated workforce, and a stable business environment; the latter is particularly crucial in these turbulent times.
The extension of the furlough scheme
“The Chancellor’s decision to extend furlough [until September] will be hugely welcome for firms who’ve continued to struggle through this latest lockdown, but this solves just one part of a much bigger problem.
“Many workers being kept on the scheme will now be feeling huge financial and mental strain resulting from prolonged job insecurity and reduced pay, meaning businesses taking advantage of the extension need to have robust support in place for this section of their workforce. Even if you already have a benefits and wellbeing strategy in place, it’s well worth reassessing people’s current needs and priorities, as it’s more than likely you’ll find certain resources could be better utilised moving forward.
“The Prime Minister’s roadmap out of lockdown put the return of ‘normality’ firmly on the horizon, so when we eventually make it through the other side it will be just as important to have measures in place to support employees through the lasting effects of the pandemic. Workers have been incredibly loyal during a tough year, so these decisions should not be taken lightly.”
-Steve Bee, Director of WorkLife by OpenMoney
The extension to the stamp duty holiday and introduction of a government-backed 5% mortgage
“The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just 5% reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained.”
-Tom Brown, Managing Director of Real Estate at Ingenious
Help to Grow
“We applaud the government’s new £520m Help to Grow scheme, which aims to help small and medium-sized businesses boost their productivity. It’s particularly exciting to see the digital element of this, with the offer of technology advice and discounted software. This is exactly the kind of creative thinking required to get businesses back on their feet.
“It’s good to see the government offering guidance and channelling resources towards a specific and sensible direction, rather than simply throwing money at businesses and hoping for the best. It’s clear that digitisation and cloud-based operational models are the way of the future, and businesses that don’t embrace this are going to have a difficult time competing in the post-COVID era. Finance decision-makers, in particular, ought to use this ‘great pause’ to reassess their business and payments strategy, ensuring that these are fully optimised for life beyond the lockdown.”
The £100m investment in the HMRC taskforce
“This is a positive announcement by the Chancellor and more than 1,000 new investigators may go some way to recouping the £billions which have been lost to fraud over the past 12 months of the coronavirus crisis.
“There’s no doubt that extra resources are much in need, particularly as the Chancellor has also announced a new Restart fund for businesses to replace the Bounce Back loans, which was wide open to fraud.
“But it’s also vital that a significant amount of that £100m investment goes into the systems used by HMRC to find those responsible for fraud. Without the use of the latest digital platforms to run ID checks and verify information on a global scale, these investigators will be in danger of just becoming busy fools.”
-John Dobson, CEO at AML specialists SmartSearch
The wider implications for the FinTech industry
“In the face of adversity, the UK FinTech industry has proven its resilience, attracting $4.6bn in VC investment last year despite the challenges and uncertainty caused by the pandemic. But safeguarding this growth and establishing the UK as a world leader in FinTech will require us to cultivate an attractive and prosperous environment for talent from all walks of life.
The Chancellor’s ‘fast-track’ FinTech visa is a welcome step in the right direction and there’s no doubt that the Kalifa Review signals a commitment to long-term investment. However, true innovation comes through diversity of thought and background, and as a migrant myself, the budget was missing this final piece: a reassurance to foreign talent that there is a home for them in the UK FinTech community.”
-Daumantas Dvilinskas, CEO and Co-Founder, TransferGo
Contactless payment limit
“The single contactless limit for credit and debit cards will rise to £100, and cumulative contactless payments up to £300 (before the need for consumers to input their chip and pin). This change may cause a divide among consumers, some may celebrate the change whereas others could now be concerned about over-spending or fraud. It is wise for customers to keep a close eye on where their money goes and be aware of when they will be required to use their pin. Peace of mind is a definite benefit when using a credit card for shopping, either in-store or online, as consumers are protected under Section 75 of the Consumer Credit Act for payments of £100 or more. If shoppers struggle to pay back their balance, they would be wise to hunt down a decent interest-free credit card for extra breathing space to tackle the debt.”
-Rachel Springall, Finance Expert at Moneyfacts.co.uk
What was missing?
“In a number of ways, the budget did not have the sharp teeth so many feared. There was no mention of a wealth tax, no wholesale reform to the inheritance tax regime, no sign of the increases in Capital Gains tax that were thought inevitable and an extension to the SDLT holiday. That is not to say that the door has now closed on these changes; in fact, we think it remains wide open and that the Chancellor will turn his attention to some of them in due course.
“It is also interesting to see the government’s forecast for inheritance tax receipts for the coming year has, for the first time, reached £6 billion. With this news and the OTS’ most recent report on the subject in hand, it remains an area we believe that is due for significant reform in the coming couple of years.”
– Tim Snaith, Partner at Winckworth Sherwood