Rishi Sunak’s second budget has received recognition for being generous, shrewd and pragmatic. The many pre-released and predictable initiatives were there, yet he still managed to pull some rabbits out of his hat.
There were positive announcements for businesses and house movers and the budget was welcomed by the Office for Budget Responsibility who forecast a more sustained and swifter recovery than predicted in November, with UK GDP recovering to pre-Covid levels by the middle of 2022, six months earlier than expected.
The Budget headlines that stood out for us were the variety of packages directed at the residential and property sector, and the businesses and individuals affected. In particular: an extension to Stamp Duty Land Tax (SDLT) holiday until the end of June on properties up to £500,000, then reducing to exempt properties up to £250,000 from SDLT until September, then reverting to the norm; furlough support extended until September; and next month, a new initiative to help businesses re-open delivering loans and grants to replace current schemes. Due to re-open first, non-essential retail grants of up to £6,000 per premises will be available; hospitality and leisure – including hair and beauty salons and gymns – may be restricted in their re-opening, so could claim more generous grants of up to £18,000. All of these measures will assist our clients and tenants alike.
While there was little that will directly impact Caxtons, if Covid is kept under control by vaccination, test and trace, and other precautions we have become all too used to, the measures will help some of our commercial tenants in particular, and possibly landlords who wish to expand their property portfolios.
Graham Mitchell, Caxtons FD said: “I feel that it was on the whole a good balance between continued support where needed, investment in infrastructure projects and starting a clawback that was always going to be necessary at some stage.
“The hike in corporation tax from 19% to 25% in two years’ time was hardly unexpected. It will affect the pockets of directors and investors across the country, but collectively, we all have to do our bit to start repaying the enormous Covid debt.”
On the plus side, approximately 1.4 million businesses with profits of £50,000 or less will continue to pay corporation tax at the current rate of 19%. Thereafter, there will be an escalating rate on profits up to a maximum of £250,000, resulting in only the largest companies paying the full 25%.
“A top rate of 25% would mean that the UK is (currently) still positioned below many countries in the OECD including USA, Canada, New Zealand, Japan, Germany, Australia and France. “
In order to embed his Covid recovery plans, the Chancellor also introduced additional business grants; for the retail, hospitality and leisure sectors an extension to the business rates holiday until June this year with a 66% reduction until 31st March 2022; and VAT reductions for the hospitality and tourism sectors until the end of the tax year.
Graham continued: “I also hope that high street businesses across the county will take advantage of the new £5bn grant scheme to enable non-essential businesses to re-open (up to £6,000 per premises).”
One surprise ‘rabbit’ was that any corporate investment in plant and machinery made during the next two years will attract a reduction in tax liability equivalent to 130%. So, speculate to accumulate was definitely the message.
The Chancellor confirmed there will be eight new freeports across England with one on our doorstep in the Thames Estuary.
As well as by means of the new Corporation Tax rates, the Treasury will claw back tax by holding personal allowances at £12,570 and the higher rate threshold at £50,270 until 2026 – so any pay increases during that time will all be subject to tax.
There were no changes to income tax, national insurance or VAT rates.
“We hope that this budget will bring more certainty, more positivity, enabling our clients to plan for the future and our tenants to experience restored job security. This is a budget designed to open the door to Covid recovery – a long way off, but a beginning. We shouldn’t be under any illusions that it will be easy or quick, but hopefully it will be successful in the long-run.”
If you would like to know more about how the 2021 Budget may impact your property needs please contact us on 01474 537733.