Earlier this month, on the 3rd March 2021, Chancellor of the Exchequer Rishi Sunak announced his 2021 Spring Budget Review. His plan was based on three principles;
- Continue to do whatever it takes to support the British people and businesses through the current period of crisis
- Begin to fix public finances now the UK is on its road to recovery
- Begin to work on building the UK’s future economy
Small and Medium Enterprises (SMEs) account for three-fifths of the UK economy and around half the national turnover in the private sector, with over 5.94 million businesses recorded at the start of 2020. To ensure he is keeping his word to do ‘whatever it takes’ to support the UK recover from the acute damage caused by COVID-19, it was imperative to ensure that SMEs were considered in his spring 2021 budget.
In this insight, we will be covering some of the considerations that SMEs should be taking following the announcement of the Chancellors 2021 Budget Announcement.
Small Businesses will be exempt from the Corporation tax increase
In his brief, The Chancellor announced an increase in corporation tax from April 2023 to 25% on all profits over £250,000. The Chancellor insisted that although the rate was being increased, the UK will still have the lowest corporation tax rate in the G7, and only around 10% of companies are predicted to have to pay the higher rate of tax.
SME’s and other smaller firms with profits less than £50,00 have the advantage of enjoying the current 19% tax rate and not being burdened by the new increase! A tapered rate is also planned to be introduced for businesses who earn above £50,000 annually so that only businesses making over the £250,000 mark will be affected.
The Help To Grow Scheme
Chancellor of the Exchequer Rishi Sunak announced a new £520million Government scheme, which is due to support around 130,000 small and medium-sized businesses nationwide. This scheme will be offered through two key streams – digital and management.
Help to Grow will provide access to management training, technology advice, and discounted software to improve productivity. The scheme is planned to enable businesses to access some of the UK’s top business schools and encourage more businesses to adopt technologies to keep up with bigger, global rivals. Businesses will also be entitled to 50% off software up to £5,000 to support their business.
Grant funding will become available to businesses through a new £5bn Restart Scheme to support the high street as it debuts from the acute damage caused by COVID-19. The Government supported scheme will provide up to £18,000 for leisure and hospitality businesses and £6,000 for non-essential retail. Combined with the several other businesses help that the Government has provided to the high street businesses, it is estimated that the total cost of support is around £25bn.
The sum you will receive is based on your rateable value.
- If your rateable value is £15,000 or less, you can claim up to £8,000
- If it’s between £15,000 and £51,000, you can receive up to £12,000
- If your rateable value is over £51,000, then you can claim up to £18,000
Local authorities will also be given an extra £425m to distribute to businesses that are not eligible got the grant but are still suffering due to COVID-19. The new Grant will replace the monthly Local Restrictions Support Grant, and Local Restrictions Support Grant as these will both close at the end of March. Around 700,000 businesses in England will be eligible for the grant.
Business Rates Holiday
The Institute of Chartered Accountants in England and Wales (ICAEW) recently found that just one in four of its members said their clients in retail, hospitality, and leisure would be able to pay business rates in full at the end of March. Fortunately, following the Budget announcement earlier this month, the Chancellor extended the business rates holiday in England by an additional three months. That means 750,000 retail, hospitality, and leisure properties in England will pay no business rates for three months from April 1 when combined with Small Business Rates Relief, with further relief available for the rest of the year.
Reduced VAT for Tourism and Hospitality
The Government has also extended the temporary 5% reduced rate of VAT until 30th September 2021. To help businesses manage the transition back to the standard rate, a 12.5 percentage rate will then apply for a further six months, until 31 March 2022.
Self-Employment Income Support Scheme
The Chancellors announcement also confirmed a fourth and fifth grant for the Self Employment Support Scheme (SEISS). It is estimated that around 600,000 people, many of whom became self-employed in 2019-2020, would now be able to claim direct cash grants under SEISS. The 2021 budget revealed details of a fourth grant covering 80% of three months average trading profits, which can be claimed from late April, with a single payment instalment (capped at £7,500) to cover the period February to April. A fifth and final grant was then announced, covering the period from May until the end of the scheme in September, with claims to be made in late July.
The announcement of the Furlough extension was welcomed by many small businesses, who have used the scheme to reduce their overhead costs. Many have seen and thanked Furlough as the driving factor that elped keep unemployment in check during COVID-19. The Coronavirus Job Retention Scheme (CJRS or Furlough) has now been confirmed to continue until September this year. This will allow millions to continue having 80% of their wages paid and will increase job security. The Chancellor announced a phased-out approach to ending the CJRS, with employers being expected to contribute 10% towards employees’ wages by July and then increasing to 20% in August and September as the scheme comes to an end. There will, however, be no effect on the employee and what they receive.
The Treasury is expanding with new campuses to be established in Darlington and Leeds. These new sites will be home to a new international infrastructure bank. The latter will be used to hand out £13 billion of equity and debt capital. It will also have £10 billion of guarantees and will be able to offer loans to local authorities.
The Chancellor also announced eight locations for the establishment of new freeports, which will make it easier and cheaper to conduct business and create jobs and business opportunities within these regions. The regions selected for the new freeports are East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.
How can Animo Help?
Our expert consultants highly anticipated the Budget announcement for 2021. We ensured we were more than prepared to support any new businesses with queries following the announcement! If you feel like your business may be affected by one of the above, get in touch with us today, and one of our expert consultants will be able to advise on best business practices. Call us at +44 (0)207 060 0835, email us at email@example.com, or by filling in a contact form below, and one of our consultants will be in touch shortly!
For more information on the 2021 Budget, look at our Budget Report or read our previous insight – Everything you need to know about the UK’s 2021 Budget.