Budget 2021: Furlough Scheme, Stamp Duty Holiday & Business Rates Relief

5 March 2021

Chancellor Rishi Sunak this week announced a £280 billion budget to be used to support and help protect families, businesses and jobs impacted by the Covid-19 pandemic.

This was never going to be an easy budget to balance. On one hand there is the need to revitalise a stagnant economy, with the Chancellor confirming that the “economy has shrunk by 10% – the largest fall in over 300 years”; on the other hand there is the significant task of recovering the direct costs of the Covid-19 pandemic with “borrowing (being) the highest it has been outside of wartime”.

In this article we cover some key points and offer guidance in respect of the Furlough Scheme, taxes imposed on property purchases, and business rates.

Furlough Scheme Extension

With businesses continuing to navigate their way through the COVID-19 Pandemic the Chancellor extended the Coronavirus Job Retention Scheme (commonly referred to as the Furlough Scheme) to the end of September 2021, aiming to protect jobs and people’s livelihoods during what is hoped to be the last lockdown now that a vaccine is being rolled out.

The Scheme

The Furlough Scheme was originally introduced to allow employers to place their employees on a period of ‘Furlough’, in the hope of preventing mass redundancies, with the scheme paying 80% of the employees’ wages whilst the employer is unable to provide work as a result of the pandemic.

Data shows that 11 million jobs have been saved by the Furlough Scheme, avoiding redundancies and enabling employers to secure the longevity of their business. Over four million people still remain on furlough and this extension will continue to be a lifeline for many employees and businesses.

What is the Update?

The Furlough Scheme will continue to operate ‘as usual’ with employees continuing to receive 80% of their usual pay for hours not worked (up to a cap of £2,500), until the end of September 2021. As of the 1 July 2021 however, employers will be required to contribute 10% of the furlough payment, followed by a 20% contribution from 1 August 2021 until the scheme comes to an end on 30 September 2021. Employers will also continue to pay national insurance and pension contributions. Further guidance on this can be found here.

What should employers do?

If your employee is currently on a period of furlough, we always recommend keeping in contact with them during this period. We also recommend obtaining agreement from the employee where practicable, to a further period of furlough until 30 September 2021.

What about the self-employed?

The UK government has acknowledged that COVID-19 continues to negatively impact those who are self-employed. The Chancellor confirmed that the fourth Self-Employment Income Support Scheme (‘SEISS’) grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, and capped at £7,500.

The grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in the 2019 to 2020 tax year. The rest of the eligibility criteria remains unchanged.

For more information speak to our dedicated Employment Law Team by visiting their website page here.

Stamp Duty and Land Transaction Tax Holiday

Rishi Sunak also made welcome announcements affecting the Property Sector. A ‘collective sigh of relief’ was heard from those under pressure to complete residential property transactions by the end of March 2021, as the Stamp Duty (‘SDLT’) holiday was extended in England and Northern Ireland.

Shortly thereafter the Welsh Government followed suit and announced that the Land Transaction Tax (‘LTT’ – the Welsh equivalent of Stamp Duty) holiday would also be extended.

What Does This Mean?

The SDLT holiday, applicable in England & Northern Ireland, means all residential property purchases, up to the value of £500,000, will be exempt from paying SDLT until the end of June 2021.

From 1st July the threshold will be lowered to residential property purchases worth up to £250,000 and this will stay in place until the end of September 2021. Thereafter the SDLT threshold will return to the pre-pandemic threshold of £125,000.

The LTT holiday, which applies in Wales, means residential properties purchased up to the value of £250,000 will not be subject to LTT and this will remain in place until 30 June 2021.

From the 1st July the pre-pandemic threshold of £180,000 will return, with the Welsh Government confirming no transitional rules to reflect those in England.

Does This Apply to Additional or Second Property Purchases?

The Land Tax holidays do not apply to those purchasing an additional property and the usual higher rate surcharge will apply.

In Wales, the higher rate LTT surcharge was increased by 1% across all bands on 22nd December 2020.

How Do I Calculate Land Tax?

The thresholds can be confusing for those not familiar with property buying and selling. Before agreeing to purchase a property it is recommend that a buyer budget for any Land Tax payable.

The Government have supplied online Land Tax calculators which can be found here (England and Northern Ireland) and here (Wales).

Your Conveyancer will also be able to assist with calculating the Land Tax on a purchase.

Further assistance for people trying to get on to the property ladder

The creation of 95% mortgages for those struggling to get onto the property ladder will surely be a welcome addition to people with smaller deposits. Several ‘big lenders’ including Lloyds, NatWest, Santander, Barclays and HSBC have already announced they will be backing the scheme from next month. Further guidance from the Government will be published in the coming weeks.

For more information speak to our dedicated Residential Conveyancing team by visiting their website page here.

Business Rate Relief

The hospitality and tourism sector, and all non-essential retail, have been the hardest hit by the pandemic, particularly during periods of lockdown. The Government announced their commitment to help by continuing to exempt these businesses from paying business rates until the end of June 2021. This exemption will then be followed by a further six-month period where rates will be discounted to one-third of the normal charge, up to a maximum of £2m for closed businesses. It is hoped that this sector specific support will assist businesses through the challenges that this period has presented.

The Chancellor did not have any easy task with this Budget; however, so far, it seems to be being viewed as a fair and progressive Budget, having made provision for the needs of a Country in the midst of a global crisis, with some hard lines being taken to narrow the growing fiscal deficit.

If you require any further information, guidance or assistance with residential conveyancing, employment matters or corporate and commercial advice, visit the pages of our specialist teams here:

Residential Conveyancing

Employment Law

Corporate & Commercial

This article was produced for Redkite Solicitors by a team including Ryan Hogarty, whose details can be found here; Natasha Lawrence, whose details can be found here, and Danielle Spittles, whose details can be found here.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.