What does today’s UK Budget – aimed at protecting jobs and livelihoods – mean for you?

Chancellor Rishi Sunak outlined a three-point plan to support people through the coming months, rebuild the economy and fix public finances when he delivered his much-anticipated Budget in the House of Commons today (Wednesday 3 March). The Chancellor recognised that this continues to be a challenging time for many, and issued a stark warning of tough economic times ahead.

In a Budget that was designed to “protect jobs and livelihoods” some key points:

• The furlough scheme is being extended until the end of September 2021
• The £20 uplift in Universal Credit and Working Tax Credits is extended temporarily until the end of September 2021
• There will be two further grants for those who are self-employed
• Access to grants for self-employed people is being extended
• There will be an increase in the National Living and Minimum Wages from April
• No increase in Income Tax or National Insurance Contributions however the personal tax thresholds will be frozen until April 2026
• Increase in Corporation Tax on business profits from April 2023, with exemptions for businesses with small profits
• Through the Barnett Formula, funding for the Northern Ireland Executive will be increased by £410 million.

Further information is available below, and you can read the full detail of today’s Budget on the Government’s website: here.

Welcome extension to the furlough scheme

The furlough scheme, which was due to finish at the end of April, has now been extended until September. Under the scheme, employees will continue to receive 80% of their usual wages for hours not worked, up to a maximum of £2,500 per month. Up until the end of June, the full 80% will be met by the Government however, from July, employers will be required to contribute – first 10%, then rising to 20% in August and September.

This announcement, and the phased tapering-off of the scheme, will be welcomed by employers as well as employees, many of whom will have been concerned that if the furlough scheme ended too soon it could put them at risk of redundancy.

However it is important to remember that employers already incur costs for staff who are on furlough, including employer National Insurance contributions and pension costs, and annual leave entitlements may still build up. With employers also required to contribute to wages for hours not worked from July, it will be important that this is accompanied by an opening up of the economy and an ability to generate income.

Employers can continue to furlough employees for any amount of time and any work pattern, while claiming the grant for the hours not worked. Employers may also wish to engage with their employees who are on furlough about using their paid holiday leave entitlements.

If you are an employee who is planning to take paid parental leave or adoption leave, this will be paid based on your usual earnings, rather than on your furloughed rate.

Support for the self-employed continues

A fourth grant covering the months February to April will provide support of 80% of three months’ average trading profits, up to £7,500. A fifth grant, for the period May to September, will see support tapered with those who have experienced a 30% decrease or more in turnover receiving the full 80% grant, while those who have experienced a decrease in turnover of less than 30% will be entitled to a 30% grant.

The Chancellor also announced that 600,000 more self-employed people, those who are relatively newly self-employed and have now completed a tax return for the 2019-20 financial year, will become eligible for Government help, as access to grants is widened.

While this is welcome for those who will benefit, there are still groups of people who have received no, or very limited, financial support from the Government with examples including some new business owners, small limited company directors or those in between jobs at the start of the pandemic.

Universal Credit

The Chancellor confirmed that the temporary £20 uplift to Universal Credit has been extended for six months. Similarly, claimants in receipt of Working Tax Credit will receive an additional single payment of £500, which we understand will be paid by 23 April 2021.

While a temporary extension to the Universal Credit £20 uplift will provide some short-term relief, this simply does not go far enough to help keep families afloat or provide longer term certainty. The uplift has provided a lifeline for the families on low incomes who we speak to every day, already struggling to afford food and essentials, and at risk of being pulled into poverty. The Chancellor also failed to extend the lifeline to legacy benefit claimants, affecting many who are sick, disabled or carers. It is of particular concern that the uplift is due to end at the same time as the furlough scheme – the very time when people may be even more in need of this vital support. We are continuing to call on the UK Government to make the uplift permanent and extend it to legacy benefits.

It was also announced that the suspension of the Minimum Income Floor for self-employed Universal Credit claimants will continue until the end of July 2021. This will be gradually reintroduced from August, but work coaches will be given discretion to not apply it on an individual basis where they assess that claimants’ earnings are affected by Covid-19 restrictions.

The period to recover Universal Credit advances will also increase to 24 months, while the maximum rate at which deductions can be made from a Universal Credit award will reduce from 30% to 25% of the standard allowance.

The Government also confirmed it will continue to treat Working Tax Credit claimants across the UK who have been furloughed, or who are experiencing a temporary reduction in their working hours as a result of Covid-19, as working their normal pre-Covid-19 working hours.

National Living and Minimum Wages

From April 2021, there will be an increase in the National Living and Minimum Wages. The National Living Wage will increase by 2.2% to £8.91 an hour, with this rate extended to those aged 23 and over, rather than 25 and over as is currently the case. The rates are set out below:

• £8.91 per hour for workers aged 23 years and over – National Living Wage
• £8.36 per hour for workers aged 21-22 years
• £6.56 per hour for workers aged 18-20 years
• £4.62 per hour for all workers under the age of 18, who are no longer of compulsory school age
• £4.130 per hour for apprentices under 19, or for first year apprentices 19 or over.

Last year the Government announced changes to the rules surrounding minimum wage in relation to Childcare Vouchers. Previously parents could not avail of Childcare Vouchers in cases where the salary sacrifice would bring their hourly rate below the National Living Wage / National Minimum Wage. However, a change in the rules means this is no longer necessarily the case and Employers For Childcare can advise any parents to whom this change may apply and employers who would like more information.

Tax measures

The Chancellor announced that there will be no increase in Income Tax or National Insurance Contributions however the personal tax thresholds will be frozen from 2022 until April 2026.

For businesses, there will be an increase in the Corporation Tax rate on business profits from April 2023, rising from 19% to 25% for businesses with profits of £250,000 or more. The smallest businesses with profits of £50,000 or less will continue to pay Corporation Tax at the 19% rate, and there will be a taper from the lower rate to the higher rate.

Other announcements

• The limit on contactless card payments is increasing from £45 to £100
• A mortgage guarantee scheme will help people with small deposits to get on the property ladder
• Alcohol and fuel duties have been frozen
• Increased support for apprenticeships
• An extension of the stamp duty holiday for property sales.

We are here to help you

We would encourage anyone wishing to find out what financial support they may be entitled to, to contact our Family Benefits Advice Service for free, impartial and confidential advice on 028 9267 8200 or email hello@employersforchildcare.org