Budget 2021: AAT welcomes skills investment and small business support

AAT has responded to the key measures announced by the Chancellor Rishi Sunak in today’s Budget.

Phil Hall, AAT's Head of Public Affairs & Public Policy, said: "AAT were particularly pleased to see the furlough scheme extended to September, as well as continuing and expanded grants for self-employed people and small businesses. The Chancellor’s commitment to investment in skills and training – including the Kickstart and Restart programmes and the Lifetime Skills Guarantee, as well as pledges to double apprenticeship incentives to £3,000 and triple the number of traineeships through a £126 million investment – should also help more people around the UK to gain the skills they need to develop and thrive in their careers.

"Additionally, the government has recognised that small and medium-sized businesses are key to the UK’s economic recovery, and we welcome the raft of measures announced to support them over the coming months, including cash grants to help businesses reopen this spring, the continuing business rates holiday and extending the VAT cut for the hospitality and leisure sectors. SMEs have been particularly badly hit by the pandemic and these measures will help them to weather the storm and get back on their feet. The new Help to Grow schemes will also support SMEs to build management and digital skills needed for a rapidly changing business environment.

"However, there were some areas where the Chancellor did not go far enough. For example, we had hoped that he would write off genuine Bounce Back Loans for SMEs. The government has admitted up to 60% of these loans could be written off, with the Public Accounts Committee suggesting the figure could be as high as 80%. AAT has long recommended that all legitimate Bounce Back Loans be written off, which would enable a speedier recovery by boosting much needed investment and growth. This is something that we will continue to press the Treasury to consider."

Phil Hall also commented further on a number of the Chancellor’s other announcements.

More support for the self-employed

"AAT has repeatedly called for more help for the self-employed during this crisis, so is pleased that the Chancellor has today confirmed millions of workers will have access to grants of up to £7,500 – claiming 80% of average monthly profits up to a maximum of £2,500 a month.

"Making an additional 600,000 self-employed people eligible by accepting claims from those who had filed a 2020 tax return by midnight last night, is also something that AAT had campaigned for and very much welcomes."

Corporation Tax to increase to 25% by 2023

"Last year AAT welcomed the retention of the main rate of Corporation Tax at 19% as the planned reduction to 17% would have meant losing £6 billion of much needed revenue for no discernible gain. After a year of unprecedented economic shocks caused by coronavirus (Covid-19), and to a lesser extent Brexit, the Chancellor is right to consider increases rather than reductions.

"Our Corporation Tax rate will never be as low as the likes of Barbados, Hungary or Montenegro, but these countries are not the UK’s international competitors. We currently have the lowest Corporation Tax rate in the G20 and even with a small increase to 25% from April 2023, we will continue to enjoy a lower than average Corporation Tax rate amongst G20 countries – and still the lowest in the G7. This decision is one that strikes the right balance between raising substantial sums of money to invest in public services and pay down debt without stifling investment and innovation."

Freezing personal tax thresholds

"Since 2010 the personal allowance at both the basic and higher rates has risen considerably, so much so that in response to the 2018 Budget, AAT stated that no further increases should take place. This was primarily because they are very expensive, disproportionately benefit higher earners and approximately three quarters of higher earners benefiting from an increase to the higher rate are male.

"AAT was already opposed to any further increases in the thresholds but this position has been solidified by the serious economic consequences of dealing with Covid-19. The Chancellor’s announcement today that personal allowances will be frozen at £12,570 and £50,270 until April 2026 is therefore an understandable, measured and necessary change that will bring in several billion pounds for the exchequer."

VAT reductions and freezes for business

"Continuing with the reduced 5% rate of VAT for hospitality and tourism for an additional six months should help two of the most seriously impacted sectors of the economy, as will the subsequent interim rate of 12.5% for another six months after that.

"Although the decision to freeze the VAT threshold at £85,000 for two years provides certainty for businesses, there is increasing recognition that a lower VAT threshold may be needed in the future. This is partly demonstrated by an AAT member survey last month, which found 37.5% of AAT members favour a reduction compared to 33% who want to retain the current threshold."