What will be the effect of pre-Budget on business?


What will be the effect of pre-Budget on business?

As the third lockdown continues the Chancellor is to unveil a pre-Budget recovery plan. 

The Budget is due to take place on 3 March, but Rishi Sunak is paving the way the pre-Budget recovery plan announcement on 22 February.

Business groups are lobbying for an extension to the furlough scheme until at least the end of June. That may happen to lessen the effect of increasing redundancies should it end in April.

As schools are unlikely to reopen until early March at the earliest, some businesses will remain closed.

The hospitality sector has been one of the worst-hit. It will need furlough (or Coronavirus Job Retention Scheme) to continue if it has to remain closed until early summer.

The self-employed

The pre-Budget recovery plan may provide a hint of what the fourth Self-Employment Income Support Scheme (SEISS) will look like.

Applications for the next round of taxable grants will start in March. This will cover the period from February 2021 to April 2021. Business groups are lobbying so that more self-employed people become eligible.

The first three grants were only available to those who submitted a tax return for 2018/2019; meaning those who started a business after April 2019 missed out.

At the moment, there are no details about the amount that will be paid. SEISS 3 covered 80% of profits up to £7,500.

New business subsidies

A new way of providing flexible and tailored financial support to businesses could be on the cards. Details are unlikely to be announced in the pre-Budget as the consultation only started this month. But we may see a hint in the Budget.

The new subsidies will replace the EU’s state aid regime, allowing the UK more flexibility in the way it supports businesses, particularly those in R&D-focused industries.

Taxing time

To pay for all the business support during the Covid-19 pandemic, tax rises are likely. But while the Chancellor may drop some clues in this year’s Budget it is highly unlikely that this will happen this year.

With the economy still facing an uphill struggle, some businesses might struggle with increases in costs at the moment. Corporation Tax may be in his sights once the economy returns to growth.

Whatever happens, you need to make sure your business is being run as efficiently as possible to navigate these difficult times. Speak to us today about how our experienced management accountants can help your business.