As part of the 2021 Budget, Rishi Sunak has announced further support for employers and the self-employed.
Small business exempt from a corporation tax hike
Small businesses with profits of <£50,000 will be exempt from the 2023 corporation tax increase to 25%. This means that approx. 70% of companies will be exempt from the corporation tax hike.
A tapered rate will be introduced for businesses with profits above £50,000. As a result, only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Grants will be available to businesses in England via a new £5bn Restart Grant scheme. This will support the High Street:
Up to £18,000 for leisure and hospitality businesses
Up to £6,000 for non-essential retail
Help to Grow scheme
A new initiative has been announced to help small businesses build skills, called Help to Grow. It comes in two parts:
Help to Grow Management – to give access to world class management training. Government will contribute 90% of cost
Help to Grow Digital – Aims to help businesses develop digital skills expert training at 50% up to £5,000
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS) will be extended to September. Nothing will change for furloughed employees, but businesses will be expected to contribute 10% from July and 20% from August.
Self-Employment Income Support Scheme
SEISS will continue, with a fourth and a fifth grant. More than 600,000 people (many of whom became self-employed in 19/20) may now be able to claim grants under SEISS.
Self-employed company directors who pay themselves in dividends were again excluded from support
SEISS Turnover Test
The fifth and final SEISS grant will cover May to September. The value of the grant will be determined by a turnover test, to ensure that support is targeted at those who need it the most.
People whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.
The final grant can be claimed from late July.
Recovery Loan Scheme
A new Recovery Loan Scheme will replace the existing financial support schemes at the end of March. The Recovery Loan Scheme is scheduled to run until 31 December 2021, but this is subject to review.
Details of the scheme include:
Up to £10m facility per business The maximum value of a facility provided under the scheme will be £10m per business. Minimum facility sizes vary. They start at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts
Turnover limit There will be no turnover restriction for businesses accessing the scheme
Wide range of products Businesses will be able to choose from a variety of products. These include term loans, overdrafts, asset finance and invoice finance facilities
Term length Term loans and asset finance facilities are available for up to six years. with overdrafts and invoice finance available for up to three years
The business will pay interest and fees from the outset Businesses will be required to meet the costs of interest payments and any fees associated with the facility
Access to multiple schemes Businesses who have taken out a CBILS, CLBILS or BBLS facility will be able to access the new scheme, although the maximum they are allowed to borrow will depend on their lender’s assessment and scheme requirements
Credit checks for all applicants Lenders must undertake credit and fraud checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders
Super-deduction tax break for investment
Sunak announced a 'super deduction' tax break for companies investing in new equipment beginning April 2021. This will cut companies’ tax bills by 25p for every pound they invest. This means they can reduce taxable profits by 130% of the cost.
Income Tax threshold freeze
Personal Tax Thresholds will be frozen until 2026, meaning that if workers’ wages increase with inflation (as would be expected), they will pay more tax over the coming years.
Apprenticeships & Kickstart
The Apprenticeship Bonus has increased to £3,000 for every apprentice taken on, no matter what their age. In addition, new investment of £126 million will be funnelled into traineeships.
Business rates holiday
The business rates holiday in England has been extended 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 1 April 2021 when combined with Small Business Rates Relief. Further relief will then be available for the rest of the year.
Trading losses will have more flexibility, allowing businesses to carry them back over three years. This applies only for losses incurred by companies for accounting periods ending between 1 April 2020 and 31 March 2022, and for individual for trade losses of tax years 2020/21 and 2021/22.
Reduced VAT for tourism and hospitality
The Government has extended the temporary 5% reduced rate of VAT until 30 September 2021. A 12.5% rate will then apply for a further six months until 31 March 2022.
If you have questions about how these changes impact you, please get in touch with the team.