If all goes to plan, today’s Budget from Chancellor Rishi Sunak will be his last while the UK is in lockdown.
In the early days of COVID-19, the public became accustomed to hearing the chancellor doing “whatever it takes” to protect the UK, its people and businesses. With a vaccination scheme and planned “end dates” for staggered lockdown easing measures now in place, today’s Budget comes almost a year after the first UK lockdown of 16 March 2020.
Although still shrouded in some uncertainty, Sunak’s announcement highlighted what he claimed was the good work of the Treasury in reacting to and protecting the UK economy, while also setting out a plan for “fixing finances” and building the economy of the future. Here is what designers should pay attention to:
Self-employment help scheme extension
Beneficiaries of the Self-Employment Income Support Scheme (SEISS) will continue to receive support until September, Sunak has confirmed. A fourth and a fifth grant, worth up to £7,500 each time, will cover losses from February, March to May, and June to July respectively.
There are some details to note however: while the fourth instalment of the grant will cover 80% of a person’s average trading profits as with previous payments, the fifth grant will have more strings attached. This has to do with providing more “targeted” support as the economy begins to reopen in the summer, according to the chancellor.
This means only those whose turnover has fallen by 30 per cent will receive the usual 80 per cent grant in the fifth instalment. Those whose turnover has fallen by less than 30 per cent will be eligible for a 30 per cent grant.
While this final grant could be significantly less than what recipients are used to, there was some good news for those who have previously been overlooked completely. Sunak said with the newly available tax return data for the financial year 2019/2020, around 600,000 people who were previously unable to claim any money through the SEISS will now be eligible.
Caroline Norbury, CEO of the Creative Industries Federation, which has been calling for the extension of support to the newly self-employed for some time, says: “These measures will provide relief to many in the UK’s creative industries, a sector that has been among the worst hit by the pandemic and that will be one of the latest to return to work.”
Furlough until the end of September
Alongside the SEISS, Sunak’s other flagship initiative throughout the pandemic has been the furlough scheme, otherwise known as the Coronavirus Job Support Scheme (CJRS). According to the government, the scheme has protected more than 11 million jobs since its inception last March.
It was due to end at the end of April, but today’s Budget has confirmed the scheme will also be extended until September, but again with some changes. Employers will be expected to contribute 10% towards the hours not worked by an employee in July. This will increase to 20% in August and September.
It is important to note the value of the payment from the employee point of view will not change and will still be worth 80% of their average monthly earnings.
The news of the furlough extension has been welcomed by the Design Business Association, with CEO Deborah Dawton saying the scheme will be “of particular use to design agencies who experience peaks and troughs in workflow.”
“During quiet periods, being able to put staff on furlough for a week enables them to retain experienced staff until business picks up on a more constant basis for them,” she says.
A corporation tax increase is coming
One of the most significant announcements from today – and one that was widely expected – is the increase in the rate of corporation tax to 25%.
This will impact design businesses no doubt, but as Moore Kingston Smith partner Mike Hayes says, the current 19% rate will be retained for very small businesses whose profits are less than £50,000.
“One of the consequences of this change is that it will make dividends less attractive as a means of taking cash out of a company than now,” he says. “This year, there is around a 3.5% saving if dividends are taken instead of salary. When the rate of corporation tax is increased, the difference between the two methods is negligible.”
Meanwhile Fennelow says the fact the tax hike won’t come into effect until April 2023 provides a good amount of time for businesses to plan accordingly.
A home for innovation
After a year of having to react to the pandemic, there was plenty in today’s Budget that was focused on the future of the UK, specifically as a home of innovation, research and development. Sunak said he would be launching a review of research and development (R&D) tax reliefs to make sure the UK remains at the “cutting-edge” of research.
Design Council head of policy Kapila Perera says design is an “essential ingredient for science and technology to innovate, bring products to market, and to meet net zero carbon targets” and so should be focused on accordingly in this mission.
“What is missing from the Budget, however, is the challenges of an ageing population and a more inclusive economy, creating jobs where people live, homes they want to live in and healthy living,” he says.
An investment-led recovery
Among the most attention-grabbing announcements was the reveal of the “super-deduction”, which will come into effect in April 2021.
This initiative aims to push the UK towards a most investment-led recovery by cutting companies’ tax bill by 25p on every pound they invest in new equipment. Dawton notes this as a “great way to mitigate the increase of [corporation tax]”.
“This should encourage businesses, both agencies and their potential clients alike, to invest in their businesses, which can only be a good thing for the design sector,” she says.
Meanwhile, Perera hopes there will be room within these plans to focus specifically on smaller businesses to “invest in design to help increase their productivity, boost R&D, and up-skill the workforce”.
What else was said?
- The Recovery Loan Scheme will replace existing loan initiatives, offering businesses between £25,001 and £10 million to be used for “any legitimate business purpose”.
- A six-month extension of the £20 per week Universal Credit uplift in Great Britain.
- £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
- Additional £126 million for 40,000 traineeships in England.
- An additional £300 million to support theatres, museums and other cultural institutions in England through the Culture Recovery Fund.
- A Help to Grow scheme to offer up to 130,000 UK companies digital and management training.
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