Everything from the budget which will affect you
Income tax levels frozen, a 5% house deposit scheme and the stamp duty holiday extended
Last updated 24th May 2022
Chancellor Rishi Sunak has announced an extension to the furlough scheme, frozen income tax and announced a 5% house deposit scheme as well many other announcements in today's budget including an extension on stamp duty.
He pledged to do “whatever it takes” to help people and businesses through the coronavirus crisis.
The yearly announcement sets out the government's financial plans and includes lots of things that affect us, like tax on fuel and alcohol, income tax rates as well as announcements on big budget spending.
This year the focus was on getting the country through the coronavirus pandemic as Mr Sunak told the house that borrowing for 2020/21 would hit £400bn.
There was some good news from the Office for Budget Responsibility which has forecast that the economy will be back to the pre-covid level by next year.
"The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast."
What Chancellor Rishi Sunak announced in the budget
Furlough extended until end of September
Chancellor Rishi Sunak confirmed that the furlough scheme has been extended until the end of September 2021, in order to try and protect as many jobs as possible. Government contribution to the scheme will begin to lift from July, when employers will be expected to pay 10% of their employees wages for hours not worked. This will increase to 20% in August and September. Employees will continue to receive 80% of their wages for hours not worked until the scheme ends in September.
Stamp duty holiday extended
The current stamp duty holiday which is in place has been extended until the end of June. This means that until the end of June, anyone in England and Northern Ireland buying property up to £500,000 will not have to pay any stamp duty. Those paying over £500,000 for property are taxed based on their value. From June to September, only those paying over £250,000 for a property will have to pay stamp duty.
Fuel duty freeze to continue
Fuel tax has been frozen for a tenth year in a row as part of the budget. For the past ten years, fuel duty has remained at around 58p per litre.
Continued freeze on alcohol taxes
So-called "Sin Taxes" on alcohol are always part of the budget. The freeze of tax on spirits, beer, wine and cider in last year's budget is continued this year.
Freeze to income tax
The Chancellor also announced a freeze on income tax. Currently, individuals earning more than £12,500 per year are taxed on their income. This will be raised to £12,570 next year, which will remain at this level until April 2026.
95% mortgages
The Chancellor announced a new 5% deposit home loan guarantee scheme as part of an attempt to boost the housing market. It will be available to both current homeowners and first-time buyers purchasing property up to £600,000. Many mortgage providers will offer 95% mortgages.
Cash grants for self-employed
Over 600,000 more self-employed workers are now eligible for cash grants. Now that the tax return data is available for the last tax year, thousands more people have access to these grants, a large proportion of whom became self-employed in 2019/20. Two more self-employed grants have been announced, meaning that people can claim up to 80% of three month's average profits up to £7,500.
£300 million for World Cup bid and sports
A £300 million package is available to a variety of sports, a sector which has been negatively impacted by the social distancing regulations. Football, cricket, tennis and horse racing will all get a chunk of this package. The Chancellor has pledged money towards a joint bid by the UK and Ireland to host the 2030 football World Cup.
Some more detail about the budget announcements:
There's always a lot of detail in a budget statement and quite a lot of the details won't come out for a few days once all the documents have been analysed, but are some things we do know that will affect you:
Stamp duty holiday extended
The freeze on stamp duty has been extended, Rishi Sunak told MPs: “I can announce today the £500,000 nil rate band will not end on March 31, it will end on June 30.
“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1.”
5% House deposit scheme
Ultra-low deposit mortgages make a comeback with a new 5% deposit home loan guarantee scheme.
The scheme will be available to current homeowners as well as first-time buyers looking to buy a house for up to £600,000.
The initiative will be available to lenders from April and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK.
Income tax rates frozen
The rates of income tax, National Insurance and VAT have all been frozen until 2026.
The lower rate of £12,500 before you start paying tax stays the same, and the higher tax bracket stays at £50,000.
The Chancellor went on: “We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.
“The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.”
Furlough scheme extended
In his statement to the Commons on Wednesday, he will build on the £280 billion package of support already given by the Treasury during the crisis, with plans to extend the furlough scheme until the end of September.
The Coronavirus Job Retention Scheme has protected more than 11 million jobs since its inception, but under plans to taper the Government’s contribution, employers will be expected to pay 10% towards the hours their staff do not work in July.
Their contribution will increase to 20% in August and September, as the economy reopens, but employees will continue to receive 80% of their salary for hours not worked until the scheme ends. It had been due to close at the end of April.
Help for self-employed
The government's self-employment support scheme has been extended.
The Chancellor said: “When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed a 2019/20 tax return.
“But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom only became self-employed last year, can now claim the fourth and fifth grants.”
Alcohol and fuel duties
A freeze on fuel duty and duties on alcohol continues.
On duties, Rishi Sunak told MPs: “I can confirm that the planned increases in duties for spirits – like Scotch Whisky – wine, cider and beer will all be cancelled.
“All alcohol duties frozen for the second year in a row – only the third time in two decades.
“And right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel. So the planned increase in fuel duty is also cancelled.”
Universal Credit uplift
An extension to the £20-per-week uplift to Universal Credit for six months has also been announced for an extra six months.
Minimum wage increase
The Chancellor announced the minimum wage will increase to £8.91 an hour from April.
Money for businesses to reopen
Rishi Sunak said a “new restart grant” will be provided in April to help businesses reopen.
He told MPs: “Non-essential retail businesses will open first, so they’ll receive grants of up to £6,000 per premises.
“Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we’ll give them grants of up to £18,000.
“That’s £5 billion of new grants, on top of the £20 billion we’ve already provided.”Mr Sunak is said to be considering raising corporation tax to as much as 25% from 19%.
Corporation tax up in the future
The rate of corporation tax that businesses pay will go up to 25% in April 2023.
Businesses which earn less than £50,000 profit will remain paying the current rate of 19%. With a taper after that meaning only businesses making £250,000 or more will be taxed at the 25% rate
He told MPs “I’m protecting small businesses with profits of £50,000 or less, by creating a small profits rate, maintained at the current rate of 19%. This means around 70% of companies – 1.4 million businesses – will be completely unaffected.”
VAT rates cut for tourism businesses
Rishi Sunak said the 5% reduced rate of VAT for the hospitality and tourism sectors will be extended for six months to September 30, telling MPs: “Even then, we won’t go straight back to the 20% rate.
“We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until April next year. In total, we’re cutting VAT next year by almost £5 billion.”
Funding to help domestic violence
The Chancellor announced an extra £19 million for domestic violence programmes. He told MPs it was “To reduce the risk of reoffending, and to pilot a network of ‘respite rooms’ to provide specialist support for vulnerable homeless women, to recognise the sacrifices made by so many women and men in the armed forces community, I’m providing an additional £10m to support veterans with mental health needs.”
Business grants
Rishi Sunak said a “new restart grant” will be provided in April to help businesses reopen.
He told MPs: “Non-essential retail businesses will open first, so they’ll receive grants of up to £6,000 per premises.
“Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we’ll give them grants of up to £18,000.
“That’s £5 billion of new grants, on top of the £20 billion we’ve already provided.”