With an ‘unimaginable’ debt of £407 billion, this week’s Budget was bound to hit some more than others.
But unlike previous Budgets, the continuing pandemic measures mean tax rises were unlikely to be announced this time.
So how do the announcements of Budget 2021 affect your business?
The Coronavirus Job Retention Scheme announced last year is better known now as the ‘furlough scheme’.
It is being extended until the end of September at the current 80 per cent of salary rate. Employees will need to pay a 10% contribution if they use the scheme in July, then 20% in August and September.
Grants for the self employed will continue until September. A fourth Self Employment Income Support Scheme grant will run for three months from February until April.
A fifth and final grant will be available from May onwards, worth three months of average profits. This will be open for claims from late July.
Those people whose turnover has fallen by 30% or more will continue to receive the full 80%.
But if your turnover has fallen by less than 30% you will receive a reduced grant of 30%. HMRC will assess these details from your 2019-20 tax return.
There was good news for many self-employed people who missed out on previous grant. If you filed your tax return for 2019-20 by midnight on 3 March, you will be eligible.
For those businesses that have been banned from opening, there will be a restart grant scheme. Retailers can claim up to £6,000 per site from April. Hospitality and leisure venues that open later will be able to claim up to £18,000.
Recovery Loan Scheme
The Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme (CBILS) end in April. These will be replaced by a government-backed Recovery Loan Scheme.
UK businesses of any size can apply for a loan or overdraft between £25,000 to £10 million. These come with a government guarantee of 80% and finance terms are up to six years for loans and asset finance. Those choosing overdrafts or invoice finance will have three years to repay the debt.
Loans will be available through a network of accredited lenders, and their names will be made public soon. Full details will be revealed in the coming weeks. You will be able to use the loan for any legitimate business purpose, including growth and investment.
We suspect the application will be similar to CBILS, which isn’t the easiest to apply for.
Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire. This is in addition to the existing £1,000 payment the government provides for all new 16–18 year-olds.
Corporation Tax will increase from April 2023 to 25% of company profits. This will apply to companies with profits in excess of £50,000. Businesses with profits less than £50,000 will continue to pay the current 19% rate.
Rates will then be tapered up to £250,000 profits when companies will pay the new 25% rate from 2023.
The business rates holiday given in 2020 will continue but with amendments. The rates relief will remain at 100% through to end of June. For the rest of the nine months of 2021/22, rates will be reduced by two-thirds, with a lower cap for those who have been able to remain open.
VAT rate for hospitality
The VAT discount to 5% for food and drink sold in pubs and restaurants will last until the end of September. For the following six months it will then increase to 12.5% instead of the usual 20% rate.
Investment tax relief
There will be a ‘super deduction’ to tax to encourage business investments. For the next two years, companies can reduce their tax bill by 130 per cent through investment. Details on what this will cover and how it will benefit businesses will be published soon.
National Living Wage
An announcement that Rishi Sunak made about the National Living Wage was effectively repeating the details we already knew. It will increase from April 2021 to £8.91.
And the Rest…
There will be no tax rises on income tax, VAT, national insurance, fuel, alcohol and cigarettes. Universal credit will rise by £20 per week
£1 billion fund to promote regeneration in Middlesbrough and Thornaby. Teesside to be a Freeport.
Stamp duty holiday to continue until the end of June and there will be no tax charged on sales under £500,000. Inheritance tax thresholds, pensions life time allowances and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26.
If you need help to understand how the Budget affects you, don’t hesitate to contact us.