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Budget 2021: The homebuilders guide


It was the most hotly anticipated Budget announcement in modern history, with the effects of the COVID-19 pandemic still front and centre and dominating much of the pre-Budget commentary and speculation.

For homebuilders, the Chancellor’s statement was greeted with a collective sigh of relief, as the stamp duty holiday was extended and extra support for buyers was announced.

There were several announcements affecting the housing sector but other measures conspicuous in their absence, with no VAT cut on retrofit and no clear detail on the launch of the Help to Build scheme.

Stamp Duty Holiday extended until June

Rishi Sunak confirmed early in his Budget statement that, as was widely expected, the stamp duty holiday on house purchases is extended for a further three months. Stamp duty has been suspended on the first £500,000 of all sales in England and Northern Ireland since July and will now continue until the end of June.

After that the nil rate band will be set at £250,000 – double its standard level – until the end of September. The stamp duty holiday was introduced to help buyers who might have taken a financial hit because of COVID-19. It was also intended to boost a property market hit by lockdown, but fears were growing that thousands of deals were at risk of falling through without an extension to the stamp duty holiday.

We expect this announcement to have a direct impact on buying and selling intentions and provide a much-needed boost to the property meeting, stretching into the crucial spring and summer months – typically the strongest time for property completions.

The new mortgage guarantee scheme

As part of its pledge to help more people onto the housing ladder, the Chancellor announced a new mortgage guarantee scheme, applicable to the whole of the UK and set to launch in April. The scheme will, according to Mr Sunak: “Make homeownership more achievable for thousands of people.” First-time buyers and existing homeowners across the UK will be able to apply for the scheme, which will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000.

Lack of Help to Build clarity

The government has pledged £2.2 billion of new loan finance to support self-build, including the delivery of the Help to Build scheme for custom and self-builders. However, the Chancellor did not take the opportunity to provide clarity on when the Help to Build scheme will commence.

It was expected Rishi Sunk would set out a roadmap for the scheme, which has been promised for some time this year and includes £150 million over four years to support Help to Build.

We expect the Help to Build scheme to transform the property market, with increased access to the self-build market opening up greater opportunities for self-builders and increasing the availability of properties in response to the growing housing crisis.

Investment incentive through ‘super deduction’

For the next two years, companies investing in qualifying new plant and machinery assets can reduce their tax bill with a super deduction, lowering their tax bill by 130% of the cost. The super deduction will also cut companies’ tax bills by 25p for every pound they invest in new equipment. Investing companies will benefit from a 50% first-year allowance for qualifying special rate assets. The Chancellor specifically referenced construction firms as benefitting from this tax break.

What else you should know

From April 2023, corporation tax will increase to 25% for companies with profits of £250,000 or higher. A small profits rate will apply to companies with profits of £50,000, keeping corporation tax at the current rate of 19%, whilst companies will pay a tapered rate for profits between £50,000 and £250,000.

Trading losses made by all businesses, including unincorporated business, in tax years 2020/21 and 2021/22 will be eligible for loss carry back relief. The losses can be carried back against the profits of the same trade for a period of three years, extended from one year.

Employers who hire a new apprentice between April-September 2021 will receive £3,000 per new hire, doubled from £1,500.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551