What was in the Chancellor’s Spring Budget speech?

March 23, 2021

Chancellor Rishi Sunak started his Spring Budget speech on 3 March 2021 by reflecting on just how much things have changed since he last delivered a Budget speech around this time of year in 2020.

“What was originally thought to be a temporary disruption to our way of life has fundamentally altered it,” he said. “Much has changed. But one thing has stayed the same. I said I would do whatever it takes; I have done; and I will do so.”

His speech certainly contained plenty of measures to help businesses manage and recover from COVID-19 – but for our other clients in the medical and charity sectors, there remain some unanswered questions.

Some of the key announcements for SMEs included:

  • Extension to furlough – the scheme will now run until the end of September, but from July onwards employers will start contributing to employees’ furlough pay.
  • Extension to SEISS – a fourth grant will run from February to April 2021, then a fifth one until the end of September. The fifth grant will provide the full amount (80% of average monthly trading profits) to businesses whose turnover has fallen by more than 30%.
  • Business rates – eligible retail, leisure or hospitality firms in England with rateable values of £51,000 or less will continue to pay no business rates until 30 June 2021. They’ll then have a reduced rate from 1 July to 31 March 2022.
  • Reduced VAT for tourism and hospitality – the temporary reduced 5% rate of VAT for the hospitality and tourism sector will also apply until 30 September 2021. After that, it will be replaced by a 12.5% rate until 31 March 2022.
  • Corporation tax – from April 2023, the main rate of corporation tax will increase to 25% – but smaller businesses are exempt from that increase because a new small profits rate of 19% will apply to profits of less than £50,000.

What does the Budget mean for charities?

No specific announcements were made for charities as part of the Budget speech, but extensions to business support could be good news for those struggling to cover employee or property costs.

Richard Bray, acting chair of the Charity Tax Group, said it was “very disappointing” that the Budget did not include targeted support for charities.

He also called for confirmation that EU state aid rules will no longer apply to the restart grants offered to businesses in England.

These grants offer up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.

If state aid rules continue to apply, however, the amount some organisations can receive from the Government will be limited. Bray warned that this could mean “charities will miss out on millions of pounds of essential funding”.

What does the Budget mean for the medical sector?

Despite calls from the British Medical Association (BMA) to increase core NHS funding by at least 4.7% after 2021/22, no new funding for the health service was announced in the Chancellor’s Spring Budget speech.

There was also no extension of support for general practice, to follow up the £150 million COVID capacity fund which ran from October 2020 to the end of March 2021.

An additional £1.65 billion was announced, however, to support the COVID-19 vaccine rollout.

A key concern for doctors and other higher-earning medical professionals was the decision to freeze personal tax thresholds – in particular, the pensions lifetime allowance.

This allowance restricts the amount of pension benefit that can be withdrawn without a tax charge.

As it’s now set to remain at its current level of £1,073,100 until at least April 2026, more higher earners are likely to be included in the charge over the next few years.

This is particularly problematic for doctors because the NHS superannuation scheme doesn’t allow for much flexibility when managing pension contributions.

A recent survey of more than 7,000 doctors by the BMA found that as a result of the allowance being frozen, 72% of doctors are likely to leave the NHS earlier, and 61% would be likely to work fewer hours or part time.

Vishal Sharma, pensions committee chair at the BMA, said this was “nothing short of a punitive tax”, and warned of a “potentially disastrous impact” on the NHS and patient care.

The Government recently published a solution for judges who faced a similar problem, and the BMA is arguing the same reform should be provided for doctors.

Get in touch to talk about what Spring Budget 2021 means for you.

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