Personal Law

Furlough and Stamp Duty Extended: Chancellor Delivers Budget

Estimated read time: 3 mins

Carrie Tennick, March 03, 2021

The chancellor has announced his budget for 2021, setting out how the government plans to tackle the economic consequences of the coronavirus pandemic.

Rishi Sunak explained that the budget would deliver a “three-part plan” to maintain employment and livelihoods. That plan begins by doing “whatever it takes to support the British people and businesses through this moment of crisis”.

The second part will involve “fixing the public finances”, while the third will “begin the work of building our future economy”.

The chancellor set out a number of plans and updates to existing policies. Let’s take a look at some of them.

Furlough scheme extended

It had already been announced that the furlough scheme would be extended until September 2021. This will keep people employed as businesses try to recover some of the finances they lost during the worst months of the crisis.

The scheme will continue to ensure that employees receive 80% of their wages until it ends. Employers are going to be asked to contribute 10% in July and 20% in August and September, until the scheme is phased out.

Sunak said unemployment is expected to hit 6.5%, which is a lower estimate than the 11.9% predicted last July. He explained that this reduction means 1.8 million fewer people will lose their jobs than previously expected.

Helping homeownership

The Stamp Duty holiday is also going to be extended. Following calls from across the housing market, the chancellor will keep the cut to Stamp Duty on homes worth up to £500,000 going until June 2021.

From then, there will be a higher threshold for the tax to apply. Stamp Duty will not be payable on homes worth up to £250,000 until September. From October, rates will return to normal.

The chancellor also announced changes to mortgages. The government will introduce a mortgage guarantee to help buyers access mortgages up to £600,000 with just a 5% deposit. Sunak said the government wants to “change generation rent into generation buy”.

Support for vaccines

Sunak announced the government will put an extra £1.65 billion into continuing the vaccination rollout in England.

This will go towards increasing the UK’s capacity for vaccine testing, support for clinical trials and improving the UK’s ability to get hold of samples of new variants of Covid-19. It will also be spent on a study testing the effectiveness of combinations of different vaccines, as well as a study on the effectiveness of a third dose of vaccine.

The £500 Test and Trace support payments will also be extended until the summer.

Other economic announcements

Income tax thresholds will be frozen, rather than raising National Insurance, tax or VAT. The personal allowance will stay at £12,750 until 2026, while the higher rate tax threshold will rise to £50,270 next year and then stay at that level.

Businesses that have been hardest hit by the pandemic will be in line for grants of up to £18,000 to increase their chances of survival. This will aimed at sectors including retail, hospitality and leisure. The government will also offer loans of between £25,000 and £10 million to businesses, replacing the Bounce Back and coronavirus business interruption loan schemes.

April will also see a rise in the National Living Wage, increasing to £8.91 per hour. The £20 per week uplift in Universal Credit will also be extended by six months, while eligible Working Tax Credit claimants will receive a one-off payment of £500. Fuel duty and alcohol duty will also be frozen.

In total, the chancellor said the package for supporting the UK through the pandemic in 2021-22 will be £352 billion. It is now thought that the economy will return to pre-pandemic levels by mid-2022. This is roughly six months earlier than previously expected.

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