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Budget 2021: What Businesses Need to Know

It was a Budget that we’ve all been anxiously anticipating. Many have been expecting sky-high tax increases or an end to certain COVID reliefs.

We’ve put together some of the main points that businesses need to know about.

This article contains:

  • Corporation Tax increase to 25%
  • Income tax rate frozen until 2026
  • Reliefs extended for business rates and VAT
  • Business restart scheme
  • Recovery loan scheme
  • Help to Grow Programme
  • Apprentice hiring incentive
  • Furlough extended until September
  • Wider support for the self-employed

Corporation Tax increase to 25%

One of the big business-related headlines to come from the Budget was the Corporation Tax increase. Chancellor Rishi Sunak confirmed that from 2023, the Corporation Tax rate will increase from 19% to 25%.

However, this will only apply to those with profits above £250,000 a year. This means that the majority of small businesses will still remain at the 19% rate.

Income tax rate frozen until 2026

While many were expecting a tax increase, the government has instead designed a freeze on the personal allowance. The rate before people must pay tax will increase to £12,570 in April 2021. However, it will then remain frozen until 2026.

The higher rate threshold will also increase to £50,270 and then be frozen until 2026.

While it doesn’t feel like a direct tax increase, millions more are expected to pay income tax over the next few years.

Reliefs extended for business rates and VAT

Last year, businesses in hospitality and tourism were exempted from paying business rates, a relief which was due to end soon. However, this relief has now been extended for a further three months.

Between July 2021 and March 2022, the business rates relief will then go down to 66% rather than 100% relief. Business rates will also be capped at £2 million per business for any properties forced to be closed on 5th January 2021, or £105,000 for other eligible properties.

The VAT cut to 5% for the hospitality and tourism industries will now end in September. The rate will then rise to 12.5% for another six months, which is still much lower than the usual 20% rate.

Business restart scheme

The government announced a business restart scheme which will provide a total of £5 billion in funding in the form of small business grants. Businesses will be able to receive grants of up to £18,000. Non-essential retail businesses could also receive grants of up to £6,000 per premises.

Hospitality and leisure businesses, such as gyms, will get grants of up to £18,000 because they will remain closed for longer.

Recovery loan scheme

As many businesses will still require financial help, the Chancellor announced a new recovery loan scheme that allows businesses to apply for loans from £25,000 to £10 million. This will be available for all types and sizes of business and will replace the Bounce Back Loans.

Help to Grow Programme

The Help to Grow programme is a new scheme that will offer up to 130,000 businesses digital and management help. The scheme aims to help SMEs learn new skills, boost profits and reach new customers.

Apprentice hiring incentive

To boost the number of apprenticeships in England, the government announced that the hiring incentive scheme will be extended to September 2021. The payment will also increase to £3,000.

Furlough extended until September

The furlough scheme, which pays 80% of an employee’s wages for the hours they can’t work, will also be extended to September.

Employers will be expected to pay 10% towards the hours their staff can’t work in July, with this increasing to 20% in August and September.

Wider support for the self-employed

The Self-Employed Income Support Scheme (SEISS) has also been extended for a fourth and fifth grant until September.

A fourth grant will run from February to April, covering 80% of three months’ trading profits - up to a maximum of £7,500. To receive the grant, your turnover must have fallen by 30% or more to get the 80% grant. However, if your turnover has fallen by less, you might still be able to get a 30% grant.

While many have already benefited from the SEISS, millions of others have been deemed ineligible for support. One of the surprise announcements in the Budget will see a further 600,000 self-employed people able to access government grants.

Those who were previously ineligible due to being newly self-employed will now be able to get help. If you began self-employment during the 2019/20 tax year and filed a tax return for this year, you could get a government grant.

While there were many other announcements made at the Budget 2021 speech, these are the key points likely to affect businesses. For the full list of changes, you can visit the government’s website for more details.