Rishi Sunak has announced that some important coronavirus support measures will be extended until September.

The Chancellor also said that the economy shrank by 10% last year and that some tax changes would be needed to help rebalance the public finances.

Coronavirus support extended until September

Coronavirus lifelines like the furlough scheme and the £20 Universal Credit top up have been extended by another six months. The self-employed income support scheme has also been extended until September and an additional 600,000 people will qualify for this scheme.

The Chancellor also announced some benefits for people in work. Minimum wage will increase to £8.91 from April and Working Tax Credit claimants will receive a one-off payment of £500.

Summary:

• Furlough scheme extended until September
• £20 Universal Credit boost extended until September
• Self-employed income support scheme extended until September
• Minimum wage increased to £8.91 from April
• Working Tax Credit claimants to receive one-off £500 payment

State of the economy

As part of the budget, the Chancellor delivers an update on the state of the economy and public finances. Sunak revealed that the economy shrank by 10% last year, but is forecast to rebound in 2021 – with a predicted annual growth of 4%.

Economists believe that the economy will return to pre-Covid levels by the middle of 2022, with growth of 7.3% next year. It was also revealed that 700,000 people lost their jobs since the pandemic began. Unemployment is expected to peak next year at 6.5%, but this is lower than the 11.9% predicted previously.

Summary:

• Economy shrunk by 10% in 2020
• Economy is forecast to grow 4% in 2021 and 7.3% in 2022
• 700,000 people lost jobs in the pandemic
• Unemployment expected to peak next year at 6.5%

Tax increases

To help rebalance the economy after high borrowing, the Chancellor also announced a range of tax changes. Although the rate of income tax will not change, the Chancellor announced that the tax free personal allowance and the higher rate income tax threshold would be frozen at 2021 levels until 2026. This means that more people will pay these rates.

Corporation tax on company profits will increase from 19% to 25% in April 2023, but small companies with profits of less than £50,000 will continue to pay the 19% rate.

Summary:

• No change in the rate of income tax, national insurance or VAT
• Tax-free personal allowance to be frozen at £12,570 until 2026
• Higher rate income tax threshold to be frozen at £50,270 until 2026
• Corporation tax on large companies to rise from 19% to 25% in April 2023
• Corporation tax to be kept at 19% for 1.5 million small companies

Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “This seems to be a sensible budget plan from the chancellor. Crucially, the furlough scheme and Universal Credit top-up provide a lifeline for individuals at the sharp end of the coronavirus crisis.

“Tax increases were always going to happen and hopefully they won’t strangle a fragile recovery.”

If you are struggling with problem debt as a result of the coronavirus pandemic, speak to a member of the Umbrella.UK Insolvency team today. Call: 0800 611 8888.