What is the Budget 2021?
The chancellor of the exchequer, who oversees the government's finances, gives a Budget statement to MPs in the House of Commons every year.
It explains how the government intends to raise or cut taxes. It also involves major choices about how the government will spend money, such as health, education, law enforcement, and other public services.
Does the Budget affect every part of the United Kingdom?
Some aspects of the Budget, such as defence expenditures, have a national impact.
Others, such as education, only affect those residing in England. This is because Scotland, Wales, and Northern Ireland are entitled to make their own political decisions.
In addition to this, Scotland has the authority to levy income taxes, hence its rates are different from those from the rest of the UK. The Scottish Government will also be holding their budget on December 9 2021.
In the event that the government announces additional expenditure on sectors that exclusively impact England, the other nations will receive an equal amount of money to spend as well.
What do UK think tanks forecast for the new policies coming out of Budget 2021?
The UK think tanks determined that the initiatives introduced by Chancellor Rishi Sunak increased incomes for the poorest fifth of households by 2.8% despite Sunak’s claim that the budget has, “cut taxes for millions of the lowest-paid”.
In addition to this, households with middle incomes, on the other hand, would also face a 2% tax increase, according to the Resolution Foundation report.
Household earnings are likely to stagnate as a result of growing inflation, according to the Foundation's overnight analysis of the Budget and Spending Review 2021. The Resolution Foundation’s report has also claimed that the reductions to the amount of income families may keep from their wages if they are on universal credit only partially offset the effect of the £20-a-week increase being removed during the epidemic, according to the report.
It predicted that these households would lose £800 per year on average.
The UK government’s stance:
Despite the criticism, a Treasury spokesperson has stated that the study conducted by the foundation is incorrect and misleading, they told the BBC,
“It's misleading to imply that households will immediately face a £3,000 tax hit, because this figure appears to include business and employers' taxes which aren't applicable directly to households.”
The Treasury spokesperson also highlighted that the report reiterated the positive effects of the new Budget because it has also stated that these new government policies are projected to boost incomes for both low and middle income households.
Has the Coronavirus pandemic heavily impacted the results of Budget 2021?
The unprecedented crisis of the Coronavirus has meant that there will be a heavier tax burden according to Mr Sunak.
Mr Sunak stated that his main goals were to continue stimulating the recovery of our society and economy by initiating plans that were purely focused on the ‘Post-Covid’ era which will further increase productivity, wages, and better skills for individuals.
In order to further mitigate the damage caused by the Coronavirus pandemic, Mr Sunak pledged £150 billion in expenditure increases over three years, including over £2 billion to assist schools in England catch up following the Coronavirus pandemic, £6 billion to address NHS backlogs, and £7 billion for transportation projects.
He also revealed that the Universal Credit "taper" rate will be slashed by 8% by December 1, reducing the amount lost from 63p to 55p for every £1 earned beyond the work allowance.
Meanwhile, the National Living Wage will rise by 6.6% to £9.50 per hour next year.
Does Budget 2021 results affect businesses?
After a lengthy assessment of the present system, the UK government finally made a decision on the current business rates reform.
Mr Sunak stated that the administration will not remove business rates, but will instead make the current system more fair and efficient. The business rates system will be revalued every three years starting in 2023 which is more frequent than the current system.
Sunak claims that a new 50% business rates cut for retail, leisure, and hospitality industries will be implemented to aid those businesses severely afflicted by the epidemic. This will last for a year, with a maximum discount of £110,000. The date when this will come to effect has yet to be announced but we assume that it will be implemented in April 2022.
Businesses selling alcohol will also be affected as Mr Sunak announced that there will be a new alcohol duty taxation. The number of primary duty rates will be decreased from 15 to 6, with the general rule being that the stronger the drink, the higher the tax charge.
Some beverages (such as fortified wine and some ciders) will be subject to a higher tax than they are now as well whereas lower-strength beverages like rosé and fruit ciders will be taxed less.
The results from Budget 2021 can be confusing to many but Persona Finance is here to answer any queries you may have about how the new regulations will affect you and your business.
Persona Finance is equipped with experienced accountants who can ease your tax burden and overall business needs. We also provide essential remote accounting services for all types of businesses. please contact Persona Finance at [enquiries@personafinance.co.uk]
