The 2021 Budget was announced by Rishi Sunak on 3 March. Measures announced in the Budget included the extension of furlough and Covid financial support, while the Treasury keeps business rates suspended for a range of sectors.
What the 2021 Budget means for business
The chancellor has announced extensions to key elements of the Covid-19 economic support package as well as efforts to jumpstart business investment. The prospect of a higher corporation tax was not welcomed by big companies, however, it does not come into force until April 2023 and small businesses will remain at 19%.
Extension of Furlough until September with grant reduction from July
The Coronavirus Job Retention Scheme has been extended until 30 September 2021 and the level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the level of grant will be reduced to 70% in July, and 60% in August and September. Employers will be asked to contribute towards the cost of their furloughed employees’ wages. To be eligible for the grant employers must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
Corporation tax hike exempts small businesses
Corporation tax is set to increase from April 2023 to 25% from the current 19%. However, there is good news for small businesses.
The corporation tax rate for small business profits under £50,000, which represents 70% of actively trading companies, will remain at 19%, and there will be tapered relief for businesses with profits under £250,000. Only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
R&D tax credits for SMEs will be capped at £20,000 in one year (plus three times a company’s total PAYE and NICs liability).
Restart grants to help the high street
Grants will be made available in England, worth up to £6,000 per premises for non-essential retail businesses, and up to £18,000 per premises for hospitality and other sectors that are opening later this year. The Restart grants are administered by local councils. The scheme replaces the monthly Local Restrictions Support Grant (Closed) and Local Restrictions Support Grant (Open) programmes, which will both close at the end of March.
Business rate updates: Retail, hospitality and leisure properties in England will continue to receive 100% business rates relief until the end of June. This will be followed by two-thirds relief for the period to the end of March 2022, with some caveats. 50,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1 April when combined with Small Business Rates Relief, with further relief available for the rest of the year.
Help to grow scheme for digital and management tools
‘Help to Grow: Management’ is a new UK-wide management programme to upskill SME leaders, 90% subsidised by the government.
‘Help to Grow: Digital’ will allow SMEs to get a discount of up to 50% on the costs of approved software, worth up to £5,000, alongside free impartial advice.
Both schemes apply to businesses with between 5 and 249 employees which are registered at Companies House and trading for more than 12 months.
With the cost of software being reduced drastically over the past couple of years by a series of SaaS solutions, Help to Grow: Digital is, however, not expected to be highly impactful for a wide range of sectors.
For more information about Help to Grow, including management courses and software to manage finances and accounting get in touch with us via email at info@acuaccounts.com or by calling us directly on 0203 907 9027.
End of BBL and CBILs and new Recovery Loan Scheme
A new UK-wide Recovery Loan Scheme is set to make available loans of between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, to help businesses of all sizes through the next stage of recovery.
The Recovery Loan Scheme is scheduled to run until 31 December 2021, subject to review.
Details of the Recovery Loan Scheme include:
- Up to £10m facility per business: The maximum value of a facility provided under the scheme will be £10m per business. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts
- Turnover limit: There will be no turnover restriction for businesses accessing the scheme
- Wide range of products: Businesses will be able to choose from a variety of products: term loans, overdrafts, asset finance and invoice finance facilities
- Term length: Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years
- Interest and fees to be paid by the business from the outset: Businesses will be required to meet the costs of interest payments and any fees associated with the facility
- Access to multiple schemes: Businesses which have taken out a CBILS, CLBILS or BBLS facility will be able to access the new scheme, although the maximum they are allowed to borrow will depend on their lender’s assessment and scheme requirements
- Credit checks for all applicants: Lenders will be required to undertake credit and fraud checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders
Incentives for capital investment
Between April and March 2023, companies investing in qualifying new plant and machinery assets will be able to claim a 130% super-deduction capital allowance on qualifying plant and machinery investments, and a 50% first-year allowance for qualifying special rate assets. See here for details.
Apprenticeships and Traineeships
Apprenticeships: The government will extend and increase payments made to employers in England which hire new apprentices. Employers who hire a new apprentice between April and September will receive £3,000 per new hire.
Traineeships: Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
What the 2021 Budget means for the self-employed
Self-Employment Income Support Scheme (SEISS) extended
Chancellor Rishi Sunak has confirmed that two more rounds of grants will be made available for the self-employed via the Self-Employment Income Support Scheme (SEISS). The new grants will finally be based on tax returns for 2019-2020 allowing hundreds of thousands of the newly self-employed, who were ineligible until now, to be able to claim support.
According to the government, 600,000 more people who have filed a tax return for 2019-20 will be able to claim for the first time. The online claims service for the fourth grant will be available from late April 2021. The fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. For more information about the fourth grant visit the government website or get in touch with us via email at info@acuaccounts.com or by calling us directly on 0203 907 9027.
Reactions to the Budget
The Federation of Small Businesses (FSB) reaction to the budget:
Responding to the Chancellor’s Budget Speech in the House of Commons, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said:
“This Budget will help many small firms with their final push through to September, but there is little here to aid job creation or help people return to work. Ensuring the newly self-employed can now access support marks a big step forward – we’re pleased our campaign has been heard – but directors, who appear to have been left out yet again, will be incredibly disappointed.
Support measures should continually evolve. The challenge over the summer, and leading up to the autumn statement, will be to switch focus from survival to growth. We look forward to working with policymakers on that progression.”
Association of Independent Professionals and the Self-Employed (IPSE) reaction to the budget:
IPSE has welcomed the announcement by the Chancellor that people who were newly self-employed in 2019/2020 will be able to receive the fourth SEISS grant as a big step in the right direction. This group had previously been excluded because the government was concerned that without a full annual tax return, there would be too great a risk of fraud. Now, however, for people who filed a return before 2nd March, this is no longer a worry. This was one of IPSE’s key asks in their Budget submission, and it is very good news government took this up.
“It is troubling, however, that the government still have not taken up any of the various proposals presented to them to get support to sole directors of limited companies – a group of, by our estimate, approximately 700,000. We are continuing to push hard on this.”
Campaign Group ExcludedUK reaction to the budget:
“ExcludedUK welcomes the extension of SEISS with the inclusion of 2019/2020 tax returns in the calculation of trading profits, for which we have been campaigning vigorously over the last year. However, we know that at least three million taxpayers and households have been affected and even with this further support it does not account for this last year of decimated incomes and businesses for those who are now included, for whom this may be too little too late.
“The majority of those who have been shut out of meaningful support thus far will continue to be excluded from the schemes and so many have been plunged into debt and poverty, often in the hardest-hit industries and supply chains.”
Do you have questions about what the Budget 2021 means for you and your business?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
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