Budget 2021 – Summary for those in business

Rishi Sunak the Chancellor of the Exchequer delivered his budget 2021 today. Below we highlight the key points for those in business: 

Self-employment grants – The Self Employment Income Support Scheme (SEISS) grants will continue. 

A fourth grant will keep the same terms as the third grant and can be claimed from late April.

  • The fourth grant will be worth 80% of three months’ average trading profits;
  • Paid out in one installment;
  • Capped at £7,500 in total;
  • It will cover the period from February to April 2021

To be eligible a claimant:

  • Must have filed a 2019/2020 Self Assessment Tax Return by midnight on 2 March 2021;
  • Average trading profits of no more than £50,000;
  • Must be currently trading but impacted by reduced demand due to Coronavirus or have been trading but are temporarily unable to do so due to Coronavirus;
  • Must declare the intention to continue to trade; and
  • Reasonably believes there will be a significant reduction in trading profits.

A fifth and final grant will become available to claim from late July to provide support from May to September 2021.  This grant will be targeted to the most affected by reference to a reduction in turnover as follows:

  • Businesses with a reduction in turnover of 30% or more will receive the full grant (80% of average profits capped at £7,500).
  • Businesses with a reduction in turnover of less than 30% will receive 30% of the full grant (capped at £2,850).

Newly Self Employed – People who became self employed in the 2019/2020 tax year and who filed their Self Assessment Tax Return by midnight on 2 March 2021 for the tax year 2019/2020 will be eligible to claim the fourth and fifth grants providing they fit the qualifying criteria.  Benefiting a further 600,000 self employed people.

Furlough for employers – The furlough scheme is extended until 30 September 2021.  The Government will cover 80% of wages for employees who have been put on leave due to the pandemic until the end of June 2021, up to a maximum of £2,500 per month.

The support for employers will then taper from 1 July 2021 when the Government will cover 70% of wages in July, 60% in August and 60% in September.  Employer’s will cover the difference so that the employee receives 80% of wages during leave, costing the employer 10% and 20% respectively.

Corporation Tax increase to 25% in 2023 – The Corporation Tax rate will increase from 19% to 25% from 1 April 2023.  This will apply to companies with taxable profits in excess of £250,000.

Corporation Tax will remain at 19% for companies with taxable profits of £50,000 or less from 1 April 2023.

There will be a tapered rate of Corporation Tax for companies with taxable profits between £50,000 and £250,000 so that they pay less than the main rate of 25%.

Extended Loss Carry Back for Businesses – Both incorporated and unincorporated businesses will be able to carry back up to £2 million worth of losses for three years.  A temporary extension to the one year limit.  Businesses will be able to obtain the relief of losses in each of 2020/2021 and 2021/2022.

Super Deduction – Businesses who invest in qualifying plant and machinery assets will benefit from a tax deduction of 130% of the cost.

National Minimum Wage rates – The National Minimum Wage rates from April 2021:

  • 23 year old and above (National Living Wage)              £8.91 per hour
  • 21 to 22 year old                                                                    £8.36 per hour
  • 18 to 20 year old                                                                    £6.56 per hour
  • 16 to 17 year old                                                                    £4.62 per hour
  • Apprentices*                                                                          £4.30 per hour

*Apprentices

  • Apprentices under 19 years old – £4.30 per hour
  • Apprentices over 19 years for their first year – £4.30 per hour
  • Apprentices over 19 years for their second and subsequent year their NMW rate will apply

Apprenticeship Grants – Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire. 

Restart Grants – Cash grants of up to £6,000 per premises for non-essential retail businesses due to re-open in April 2021.

Cash grants of up to £18,000 per premises available to businesses in the hospitality and leisure industry including gyms, accommodation, leisure and personal care providers.

Discretionary Business Grants – The Government is providing all local authorities in England with an additional £425 million of discretionary business grant funding.

Recovery Loan Scheme – From 6 April 2021, a New recovery loan scheme will open to all UK businesses of any size allowing them to apply for loans from £25,000 to £10 million through to the end of 2021.  These loans will be 80% Government backed and are available to those who have already received support under the existing COVID-19 guaranteed loan schemes.

Business Rates Holiday – The 100% business rate holiday for businesses in the hospitality and leisure sector will be extended for a further three months from 1 April 2021 to 30 June 2021. 

This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

Nurseries will also qualify for relief in the same way as other eligible properties.

VAT Reduction for the Hospitality and Tourism Sector – The 5% reduced rate will be extended until 30 September 2021.

From 1 October 2021 an interim rate of VAT will apply at 12.5% for six months to 31 March 2022.  From 1 April 2022, the rate of VAT will revert back to the standard rate of 20%.

Help To Grow Schemes

Help To Grow: Management– The Government will offer a new UK wide management programme to upskill SMEs in the UK over three years.  The programme will combine a national curriculum delivered through business schools with practical case studies and mentoring from experienced business professionals.  The cost will be subsidised 90% by Government.

Help to Grow: Digital – The Government will launch a new UK wide scheme in the August to help 100,000 SMEs save time and money by adopting productivity-enhancing software, transforming the way they do business.  This will combine a voucher covering up to half of the costs of approved software up to a maximum of £5,000.

Freeports – Freeports will contain areas where businesses will benefit from more generous tax  reliefs, customs benefits and wider government support.  The current 8 successsful sites are located:

  1. East Midlands Airport;
  2. Felixstowe and Harwich;
  3. Humber;
  4. Liverpool City Region;
  5. Plymouth and South Devon;
  6. Solent;
  7. Teeside; and
  8. Thames.
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