The chancellor, Rishi Sunak, today announced a number of measures designed to help the UK bounce back from the acute economic slump caused by the coronavirus crisis. It will take a long time to recover from the extraordinary economic situation and profound damage caused by the pandemic, said the chancellor, but the government is committed to building a stronger economic future, and determined to shift resources and focus to decent, well-paid jobs and sustainable, green projects as the economy recovers.

In his second Budget, Sunak also warned that the scale of the government borrowing that has been necessary so far in the pandemic could not be ignored. But the tax increases he deems necessary to address the public debt – including a sharp rise in corporation tax – will not come into effect immediately.

The latest forecasts from the Office for Budget Responsibility (OBR) suggest that Covid-19 will be responsible for a 3% hit to the UK economy over the next five years, although GDP is expected to grow by 4% this year and by more than 7% in 2022. But public borrowing both this year and next is set to reach levels not seen since the Second World War.

The Coronavirus Job Retention Scheme – commonly known as the furlough scheme – is to be extended until 30 September in a bid to ensure businesses are well placed to take advantage of the expected post-Covid-19 recovery while also addressing concerns about rising unemployment.

The scheme, which currently involves the government subsidising 80% of the wages of staff who are temporarily laid off, was due to end on 30 April. The 80% subsidy will remain for now, but, from July, employers will be asked to contribute 10% of this, and then 20% in August and September.

Sunak also unveiled an expansion of the Self-Employment Income Support Scheme (SEISS), which supplements the income of freelancers, contractors and other self-employed individuals if they are unable to work due to the pandemic.

The scheme has also been extended until September, while it will now cover those who entered self-employment in the 2019/20 financial year – providing they had filed a tax return for that period by midnight on 2 March 2021.

As with the furlough scheme, the SEISS will be scaled back over the summer: businesses whose turnover has fallen by less than 30% will be eligible for a 30% grant rather than the full 80% for the May to September period.

The business rates holiday in England will be extended for a further three months from 1 April: the government says this means 750,000 retail, hospitality and leisure properties will pay no rates until July this year. From then until the end of March 2022, rates for qualifying businesses will be cut by 66%.

The chancellor said the current VAT reduction from 20% to 5% for hospitality businesses would be extended beyond the 31 March cut-off until 30 September. From 1 October until 31 March 2022, a special rate of 12.5% will apply.

The chancellor also announced a £150m Community Ownership Fund, which will help community groups buy or take over local community assets at risk of being lost. Community groups will be able to bid for up to £250,000 matched funding to help them buy endangered sports clubs, theatres, music venues and post office buildings that have been hit hard by the pandemic, and run them as community-owned businesses. The first bidding round for the Community Ownership Fund will open by June 2021.

In England, non-essential retail businesses can claim up to £6,000 per premises through the Restart Grants scheme, while the likes of hospitality, accommodation, leisure, personal care and gym businesses, which will be locked down for longer, will be eligible for up to £18,000 per premises.

This new scheme of up to £10m, with an 80% government guarantee, is also to be introduced, replacing the Bounce Back Loan and the Coronavirus Business Interruption Loan Scheme (CBILS), both of which are due to come to an end shortly.

Sunak announced two new schemes aimed at boosting productivity, growth and innovation in as many as 130,000 UK SMEs over the next three years.

• Help to Grow: Management will provide management training and mentoring in a 12-week course, with a 90% government subsidy.

• Help to Grow: Digital will provide productivity-enhancing software with a 50% subsidy up to a maximum of £5,000 per business, as well as free online advice regarding digital transformation. The bank is a partner organisation to the Help to Grow scheme, which will give up to 130,000 SMEs the tools to become more productive. This focus on the skills and capability of small businesses will be vital to drive future UK productivity, helping to remove barriers to growth and the economy to build back better.

For more information and to register for both programmes, visit gov.uk/helptogrow.

The government is extending its programme of payments for businesses in England that hire apprentices: employers who take on an apprentice between April and September this year will receive £3,000 per hire, an increase on the current rate of £2,000 for the under-25s and £1,500 for those aged 25 and over.

Meanwhile, a £7m fund will be introduced in July this year to support employers in creating ‘portable apprenticeships’ – where trainees are required to work across multiple projects at different businesses.

Over the next two years, the government is introducing a temporary increase in upfront capital allowances – called the ‘super deduction’ – to incentivise business investment as the economy emerges from the pandemic. From 1 April until 31 March 2023, firms that invest in the right kind of plant and machinery assets will be entitled to a 130% first-year capital allowance, which will allow them to cut their tax bills by as much as 25p for every £1 they invest.

The most significant tax rise of this Budget was the announcement that corporation tax – which currently stands at 19% – will rise to 25% from April 2023. However, the smallest businesses will be unaffected, and only those with annual profits of £250,000 or more will pay this full rate. Firms with profits of £50,000 or less will remain on the current 19% rate, while the rate will increase gradually from 19% to 25% on profits between £50,000 and £250,000.

The personal allowance and the threshold for higher-rate income tax will both increase as expected next month – to £12,570 and £50,270 respectively – but then remain frozen until April 2026. Similarly, the pensions lifetime allowance (£1.073m) and nil-rate band on inheritance tax (£325,000) will remain unchanged until that date.

While these freezes are not explicit tax increases, as people’s wages, pension savings and estates increase in value over the next five years, they will inevitably see actual and/or potential tax bills rise as a result.

Both fuel duty and duty on spirits, wine, beer and cider have been frozen for the coming financial year.

Sunak also announced eight new ‘freeports’ around England: these are areas that will benefit from looser planning restrictions, more competitive tax rates and lower tariffs on international trade. The chancellor said he hoped these freeports – to be established at East Midlands Airport, Humberside, Plymouth, the Solent, Liverpool, Teesside, Thames, and Felixstowe and Harwich ports – would stimulate additional investment in the green industrial revolution, while also increasing the UK’s international competitiveness.

The government will look to support similar initiatives in Scotland, Wales and Northern Ireland.

Responding to today’s Budget, Marieke Flament, CEO of business banking app Mettle, commented: “More people than ever are choosing to start or create a business or side hustle of their own due to changing lifestyles and personal circumstances during the pandemic, or fulfilling a personal ambition during lockdown. This ‘passion economy’ segment have been hit hard by the pandemic, with many having to turn to Universal Credit or personal finances to keep their business going.

“As the UK looks to rebound economically, it’s absolutely vital that this segment gets access to the support and services it needs in order to thrive. We’re pleased to see that the chancellor has pledged accessible loans for the self-employed and limited companies formed over the past year, as well as grants for new and small businesses.

“But these loans also need to be backed up by financial products that fit sole traders’ and side hustlers’ business models. This will make it easier for them to run successful businesses that can make an impactful economic contribution.”

Andrea Reynolds, CEO of funding specialist Swoop, said: “Despite this year’s Budget announcements being the worst-kept secret, it’s now clear there’s a lot for small businesses to feel positive about throughout the UK. Helpful interventions including extensions to the furlough scheme, VAT reductions and business rates relief, alongside £5bn in grants to help some of the hardest-hit businesses, will provide certainty and reassurance for businesses as they begin their recovery.

“There were also welcome interventions such as the super-deduction investment incentive to encourage businesses to invest and grow when they’re able, and the initiative to drive digital adoption through grants available from the Help to Grow scheme. All this positivity should help soften the blow of the future corporation tax increases. There is going to be a lot of government support out there for businesses; I would urge them to take advantage of the Grant Finder tool to check what they may be eligible for.”