Well who would have thought 12 months ago that we would still be in the midst of the Coronavirus Pandemic and yet here we are 12 months on from the last budget and many micro and small businesses were watching Rishi Sunak’s 2021 Budget last week with significant interest.
It’s fair to see that the UK economy has seen some negative challenges – Covid, Brexit and the global recession. We needed a budget to kick start the economy for 2021 and to give us a feel good factor but did it deliver?
Despite many predictions, the budget was relatively unsurprising. There was a clear short term vision to boost the economy followed by starting to claw back some of the Covid spend for the medium term.
Here’s our key highlights from Budget 2021.
Furlough Scheme: The Coronavirus Job Support Scheme, or ‘furlough scheme’ as we all now know it, will be extended until September 2021 across the UK. This will provide further protection for furloughed employees as businesses get back to more normal trading once the main Covid restrictions are eased (hopefully, on 21 June 2021).
Corporation Tax: Corporation tax will increase to 25%, in order to balance the need to raise revenue with the objective of having an internationally competitive tax system. To support the recovery, the increase won’t take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
Self Employment Income Support Scheme: The Self Employment Income Support Scheme (SEISS) for self-employed people will be extended until September 2021, with 600,000 more people who filed a tax return in 2019-20 now able to claim for the first time – previously, those with 2019-20 returns were not eligible for SEISS.
VAT Cut Extension: The VAT cut to 5% for hospitality, accommodation and attractions across the UK will be extended until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022.
Business Rates Relief: 750,000 eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates relief.
Super-deduction: Beginning from April 2021, the new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment. This is worth around £25 billion to UK companies over the two-year period the super-deduction will be in full effect.
Restart Grants: £5 billion will be available for the new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
Recovery Loan Scheme: A new UK-wide Recovery Loan Scheme is being introduced to make available loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, to help businesses of all sizes through the next stage of recovery.
Film & TV Production Restart Scheme: The Film & TV Production Restart Scheme will be extended in the UK, with an additional £300 million to support theatres, museums and other cultural organisations in England through the Culture Recovery Fund.
Apprenticeships and training schemes: There will be an extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000. £7 million of funding has also been announced for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector. There’s an additional £126 million for 40,000 more traineeships in England, funding high-quality work placements and training for 16-24 year olds in the 2021/22 academic year.
Statutory Sick Pay Costs: Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.
Help to Grow Scheme: A new Help to Grow scheme will be introduced to offer up to 130,000 companies across the UK a digital and management boost.
Future Fund: Breakthrough – the £375 million UK-wide ‘Future Fund: Breakthrough’ will invest in highly innovative companies such as those working in life sciences, quantum computing, or clean tech, that are aiming to raise at least £20 million of funding.
R&D Tax Reliefs: A review of research & development (R&D) tax reliefs will be made to make sure the UK remains a competitive location for cutting-edge research.
So What Do I Do Now?
The general recovery will take time but some businesses will need assistance sooner rather than later. There are measures contained in Budget 2021 which aim to provide support for you and your business. There are also measures outside of Budget 2021 which also can help you and your business thrive in the current economic climate.
There are also requirements for you to look further into the future and make sure that you plan your personal and business’s tax affairs so that there are no nasty surprises. (We hate nasty surprises.)
Here are our top tips for what action you should now take:
- Review all the government and local grants and similar support and make sure that you and your business are applying for this support where applicable. It is important to note that many councils have been delegated to provide this support so please track what your own council is doing for you and your business. An example for our local Stevenage council can be seen at: https://www.stevenage.gov.uk/business-and-licensing/business-rates/additional-restrictions-support-grant-2 and https://www.stevenage.gov.uk/town-and-community/emergencies/coronavirus.
- Ensure that you have prepared future forecasts to understand the effects on both your profit and cash flow from the relevant changes that are becoming relevant. For example, the VAT Deferment period runs out on 31 March 2021 and so you will need to ensure that you have set up the necessary payment plan or to include the extension of the Furlough Scheme until the end of September 2021.
- For many small businesses, it will not be possible to provide employees with pay increases so we need to look at other ways to ensure that our staff are happy, feel valued and are challenged. One way to do this is to up-skill your employees. Why not look at the ‘Help To Grow Scheme’ (https://helptogrow.campaign.gov.uk/) and see whether you and your team can benefit from the Management Training available so that as businesses start to grow back up to pre-Covid levels, you and your staff will be much better placed to take advantage.
As more guidance is issued around the Restart Grants and Recovery Loan Scheme we will bring this to you.
If you have any questions or queries about the measures announced in Budget 2021 or our recommendations, please do get in touch with us by contacting 01438 532230 or emailing us at firstname.lastname@example.org. We’ll be happy to explain the opportunities, grants, reliefs and government support that are available for your business.