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What will be in the Budget?

Written by: Emma Lunn
The past few weeks have seen leaks, rumours, predictions and speculation about what the chancellor will announce in the Budget on Wednesday 3 March.

It will be Rishi Sunak’s second Budget – the first took place at the outset of the coronavirus outbreak almost a year ago. With the country’s balance sheet looking almost unrecognisable since then, some major economic announcements are likely to be on their way.

Extension of the furlough scheme

The chancellor has hinted that the Coronavirus Jobs Retention Scheme is likely to be extended until the end of June – the earliest point at when social distancing measures will be stopped.

Sunak told Sophy Ridge on Sunday “if you look at our track record we went big, we went early and there’s more to come next week.”

Under the furlough scheme, the government pays 80% of a furloughed employee’s full wage, up to £2,500 a month. The scheme was extended until the end of April in December – it was previously due to end in March, following several extensions.

A fourth SEISS grant

Sunak has said already there will be a fourth Self-Employed Income Support Scheme (SEISS) grant to cover lost self-employed earnings for February, March and April. But despite the grant period having already started, the details are yet to be announced.

Previous SEISS grants have covered 80% of self-employed earnings up to a maximum of £2,500 a month.

New business loans

Sunak is widely rumoured to be shutting down existing Covid business support schemes at the end of March.

The Bounce Back Loan scheme and Coronavirus Large Business Interruption Loan Scheme (CLBILS) for big firms look certain to be shut down.

But the Coronavirus Business Interruption Loan Scheme (CBILS), aimed at mid-sized companies, looks set to be transformed into a ‘recovery loan’ scheme.

Tax rises

Sunak has warned that the Budget will be the moment when he “levels with people” that higher taxes will be needed to pay bills incurred during the pandemic.

The Tories pledged in their 2019 election manifesto pledge that the party wouldn’t raise the rates of income tax, value added tax and national insurance.

But what the chancellor could do is freeze income tax allowances and thresholds so that revenues rise as inflation raises wages over time.

He could also raise corporation tax, inheritance tax or capital gains tax.

Universal Credit

When the coronavirus pandemic first hit, the government increased Universal Credit payments by £20 each week. But this uplift is due to end in April.

The chancellor is rumoured to be set to announce that the £20 uplift will remain in place for another six months.

Stamp duty

The current stamp duty holiday is due to come to an end at the end of March, but The Times reported last month that this will be extended by another three months until the end of June.

This should give people already buying a property enough time to complete their purchase and take advantage of the saving, and stop property chains collapsing.

Mortgage guarantee scheme

It was announced over the weekend that buyers with small deposits are set to get extra help with a new mortgage guarantee scheme.

Like similar schemes in the past, the mortgage guarantee scheme will mean buyers only need a 5% deposit. The government will guarantee parts of mortgage loans to reduce the risk to lenders.

The scheme will be open to all buyers on all property types (not just new builds as per Help to Buy) but there will be a property price limit of £600,000.

Pension lifetime allowance

It is thought that Sunak will freeze the lifetime allowance on pensions. The lifetime allowance is the total amount you can pay into a pension and still get tax relief.

The lifetime allowance for most people is £1,073,100 in the tax year 2020-21. It was expected to increase 0.5% or £5,800 in the tax year 2021-22.

Putting increases on hold would affect higher earners who are still saving for retirement.

Online sales tax

Online retailers have been pandemic winners as shoppers turn to the internet for shopping while non-essential retailers are shut.

As a result, there have been repeated calls for higher taxes for online retailers who can normally offer cheaper prices than their high street counterparts due to lower overheads.

There has been talk both of a new 1% online sales tax or a one-off ‘excessive profits tax’ on successful online businesses.

Help for hospitality

Last August’s Eat Out To Help Out scheme provided a boost for pubs, restaurants and cafes forced to shut in the first lockdown. It offered a 50% discount up to £10 per person on meals eaten-in on Mondays, Tuesdays and Wednesdays, with businesses able to claim the cash back from the government.

There are rumours we could see a similar scheme when outdoor hospitality re-opens from 12 April, or later in the summer when social distancing rules are relaxed.

The chancellor could also freeze alcohol duty to encourage people to go to the pub, or increase the tax paid on booze bought in the supermarket.

Cladding victims

Pressure is mounting on the government to help leaseholders who are facing six-figure bills to fix building defects after decades of lax buildings regulations.

The government has announced a £5bn building safety fund – but it’s not enough and further funding could be announced in the Budget.

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