Rishi Sunak’s Budget Explained In Two Minutes

Chancellor Rishi Sunak has delivered his budget in the House of Commons as the UK plots a course out of the Covid crisis. 

Here are the key points. 

Furlough extended until September

The emergency wages scheme was due to close at the end of March, but Sunak has extended the UK-wide scheme until September. However, he will taper the Treasury’s 80% contribution from July. 

Universal Credit uplift to stay… for 6 months 

The £20-a-week uplift to Universal Credit will be extended for a further six months. But it is likely the government will continue to face pressure to make the uplift permanent.

Stealth income tax rise 

Sunak introduced a four-year freeze on income tax thresholds.

The move does not hike taxes as such, but will be viewed as a stealth tax in that it will drag employees into higher tax bands as their salaries rise. 

It has been suggested the freeze will bring an extra £6bn into the Treasury coffers. 

The pensions lifetime allowance, and the annual exempt amount in capital gains tax, will also be maintained at current levels until April 2026, he said. 

Hike in tax on big business

Sunak announced he will raise corporation tax, which is paid on company profits, from the current 19% to 25% in April 2023. 

Small businesses with profits of £50,000 or less will continue to be taxed at 19%.

The measure will be controversial among some low tax-backing Tory MPs. 

Sunak stressed the UK would till have lowest rate is the lowest in the G7, with France firms paying 33% and Germany’s 30%. 

Joe Biden’s new US administration is reportedly preparing to raise its corporation tax level from 21% to 28%. 

95% mortgages and stamp duty holiday 

Sunak said help for home-buyers is on its way with the return of 5% deposits. As part of a mortgage guarantee scheme on properties worth up to £600,000, the government will underwrite the remaining 95% of the loan.

He said it was a “policy that gives people who can’t afford a big deposit the chance to buy their own home”, adding: “As the prime minister has said, we want to turn generation rent into generation buy.”

In a separate move to bolster the property market, Sunak extended the stamp duty holiday on homes worth up to £500,000 until the end of June. 

Total cost of Covid hits £325bn

Sunak has pumped extra £1.65bn into the rollout of the Covid vaccination programme. 

He told MPs the total Covid-19 support package amounted to a staggering £352bn, or £407bn once other fiscal support is included.

He said: “Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever faced and, by any objective analysis, this government has delivered one of the largest, most comprehensive and sustained responses this country has ever seen.”

Covid-hit firms to share £5bn grant fund

Businesses hammered by Covid, such as shops, pubs, clubs, gyms and hair salons, can apply for grants of up to £18,000 as part of a £5bn scheme.

He added that the 5% reduced rate of VAT for the tourism and hospitality sector will be extended for six months to the end of September, with an interim rate of 12.5% for another six months after that.

 

Super deduction

The chancellor announced a new “super deduction” for companies investing after the Covid pandemic. He said the new measure for investing firms can see them reduce their tax bill by 130% of the cost.

Alcohol and fuel

All alcohol duties will be frozen for the second year in a row and the planned increase in fuel duty has also been cancelled, the chancellor said.

Contactless payment limit

The contactless payment limit is to more than double to £100 from £45. While legally in force from Wednesday, the increase will not happen immediately as firms will need to make systems changes.

Money for the Union

Sunak announced an increase in funding for the devolved administrations by £1.2bn for the Scottish government, amid growing demands for a second independence referendum.

He also announced £740m for the Welsh government and £410m for the Northern Ireland Executive.

Arts funding boost 

Sunak allocated £400m to help museums, galleries and especially theatres in England to reopen. 

This is in addition to the £1.57bn Culture Recovery Fund, established by Sunak and culture secretary Oliver Dowden. 

There will also be a £300m package for sports – much of it targeted at cricket.

Treasury jobs moved north 

Hundreds of jobs will be relocated from London to Darlington under the chancellor’s Treasury North project.

Sunak said that after “a lot of thought and energy”, the new economic campus would be in the north-east market town. 

Civic leaders across the north had made overtures in recent weeks for the Chancellor to send Treasury jobs their way.

A new £12bn UK infrastructure bank will be established in Leeds, with £10bn of government guarantees, Sunak added. 

Freeports announced

Sunak announced the establishment of a new set of freeports, something he claims was only possible post-Brexit. 

They are: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.

The policy will give tax breaks, cheaper customs and make planning regulations simpler for firms. 

Domestic violence cash boost

Sunak announced an extra £18m for domestic violence programmes. 

It comes after the Covid lockdown saw a rise in attacks and domestic violence killings. 

 

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