Never has an upcoming budget had the nation on the edge of their seat, such as is the case with Rishi Sunaks budget announcements due to take place tomorrow – Wednesday, 3rd March 2021. But what should you expect and how will tomorrow’s budget set the tone for the months of recovery that lie ahead?
An Increase to Taxes
With the public debt currently standing at £2tn, it stands to reason that there will be a rise in certain taxes. In the 2019 election manifesto, the government pledged not to raise income tax, value added tax and national insurance, however, there are likely to be some changes made in this area to help fill the gap. In order to encourage a rise in revenues, we are likely to experience a freeze on income tax allowances and thresholds, pushing many taxpayers into a higher tax bracket and potentially securing £6bn for HMRC.
Another area likely to feel the pinch is corporation tax. Corporation tax currently stands at 19%, however, each 1% rise is likely to raise £3.3bn each year, a significant contribution.
An Extension to the Furlough Scheme
The last thing the economy needs is a further increase in unemployment, with forecasts already predicting a rise to more than 7% of the population. It therefore stands to reason that Sunak will be seeking to extend the furlough scheme. This will likely be phased out slowly in response to the gradual lifting of restrictions.
Business rates relief will likely experience the same extension as well as a lowering of VAT for pubs and restaurants to help these sectors recover from lockdown.
A Boost to State Support Schemes
Universal credit looks set to experience an extension to the £20-a-week addition to payments, which will likely now run for a further six months. Another welcome addition to help boost employment is the increase to the temporary cash bonus awarded to businesses that take on an apprentice. This will rise to £3,000. In addition to this, the business rates holiday is set to be extended in a move to support shops and assist the high street in its recovery.
Further Hikes for The Housing Market
In order to keep the housing market ticking along, Sunak is likely to extend the stamp duty holiday, which was responsible for an 8.5% increase in the average value of a home in 2020. In addition to this the government have committed to a mortgage guarantee scheme, enabling 95% mortgages for houses worth up to £600,000. Whilst this will be welcomed by many, the flip side of the coin will be the potential rise in house prices which could make housing less affordable for many.
In a move to encourage the fast growing Fintech market to place themselves in the capital, Sunak will be looking at reforms to some British regulation, including London Stock listing rules. What exactly this will look like is yet to be revealed, however this could help inspire companies and entrepreneurs to base themselves in London.
A Focus on Environment
Whilst the UK continues to focus on the vital work being done to reduce carbon emissions, it is expected that this will not stretch to an increase in petrol duty. However, details of the ‘green gilt’ are expected to be released as well as further adjustments that focus on decarbonisation of UK homes and a move towards renewable energy.