Budget briefing | Tax |

Budget 2021: COVID-19 measures

Overview

The 2021 Budget includes an extended package of measures to help the U.K. manage the ongoing effects of the COVID-19 pandemic. In addition to the £280bn of COVID relief initiatives that the government introduced between March and December 2020, many new COVID-related schemes have been introduced in this Budget. These include both new policies and extensions to various grants and reliefs that have been introduced in the past year.

The Chancellor said that "we will continue doing whatever it takes to support the British people and businesses through this moment of crisis". The cost of the additional measures is estimated by the Treasury to be more than £352bn, which combined with last year's budget, means COVID support packages will be worth over £400bn. New measures include extending the furlough scheme until the end of September, targeted VAT relief for the tourism and hospitality industries, extending the eligibility criteria for self-employed grants, and extending business rate relief for many firms. 

Further details on many policies that have been announced are expected in the coming days and weeks, which should provide information on how these measures will operate and (where relevant) can be claimed by businesses.

Key measures:

Support for individuals

  • The extension of the furlough scheme means employees will continue to receive 80% of their salary (up to £2,500 per month) until the end of September 2021

  • The government has extended the measure that relaxed the statutory working time requirement for employees who are furloughed or who have had their working hours reduced as a result of COVID-19. To be eligible for the grant of a tax advantaged EMI option, employees must work 25 hours per week (or 75% of their working time) for the relevant business, subject to limited exceptions. The Finance Act 2020 introduced a new, time limited, exception for employees that would not otherwise satisfy the working time requirement as a result of being furloughed or having reduced working hours due to COVID-19. The exception has been extended for a further year. For more information about EMI options, please see here.

  • Government grants have been extended to a further c.600,000 self-employed individuals. A fourth grant will be made available from late April, worth 80% of average trading profits over three months from February (with a cap of £7,500). The final grant, covering the period from May to September, will be made available on the same terms as the fourth grant for anyone who saw their turnover fall by at least 30% in that period. A 30% grant is available to people whose turnover did not fall by more than that 30% threshold

  • The national living wage will be increased to £8.91 from April 2021

  • The weekly £20 uplift in universal credit will be extended for another 6 months. The government will also make a one-off £500 payment to eligible working tax credit recipients across the U.K.

  • Alcohol and fuel duties have been frozen for the year

Support for businesses

  • Until the end of June, employers will not need to make any contributions to furloughed employees other than for employer NICs and pension contributions. From July, employers must contribute 10% towards any time their staff do not work, which increases to 20% in August and through September

  • VAT payments that have been deferred by businesses can now be spread over a series of up to 11 equal interest-free monthly instalments from March 2021

  • VAT rates for the tourism and hospitality sector will remain at 5% until 30 September 2021, with a 12.5% rate applying from 1 October 2021 to 31 March 2022

  • Business rates will continue to be suspended for all retail, hospitality and leisure businesses until 30 June 2021. After that, there will be a 66% discount on rates, with up to £2m of relief available for businesses that were closed due to the pandemic

  • 'Restart grants' worth £5bn are being made available to businesses to help them reopen from lockdown. 'Non-essential' shops can receive grants of up to £6,000 per premises. Accommodation, leisure, hospitality and personal care businesses can receive grants of up to £18,000

  • From 6 April, a recovery loan scheme is being put in place whereby the government will provide an 80% guarantee on eligible loans between £25,000 and £10m. Eligible businesses include those that have been impacted by the pandemic and are viable, solvent U.K. businesses

  • The government is also investing over £100m to create a taskforce of 1,265 HMRC staff to review and combat fraud relating to COVID-19 relief measures (including in relation to the furlough scheme).

Read the full Budget here.

 

Return to Budget 2021.

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