Budget 2021: A Summary for Business Owners

Chancellor Rishi Sunak today unveiled his latest budget for the UK economy, and splashed across the front page were the words “protecting the jobs and livelihoods of the British People”. As the saying goes, you should never judge a book by its cover, and amid the impending spending cuts and tax rises needed to start chipping away at the now £2tn Covid-shaped deficit, just how far is the Chancellor willing to go to ensure SMEs, jobs and livelihoods are protected as the economy opens back up?

With the Office of Budget Responsibility (OBR) forecast predicting that the economy will return to its pre-pandemic levels by the middle of 2022, six months earlier than previously predicted, Sunak outlined his three-part plan for protecting jobs and livelihoods, and reopening and building the economy. Join us as we take a look at the new measures and support schemes that business owners should know about. 

Extension of Furlough Scheme

The Coronavirus Jobs Retention Scheme (otherwise known as the furlough scheme) has been extended to the end of September 2021, albeit with a new tiered roll-off period beginning in July. With the Government aiming for the majority of restrictions on activity to be lifted by the end of June, employers will have to start paying 10% of furloughed workers’ wages in July, rising to 20% in August and September. 

Self-Employment Income Support Scheme

With the tax return deadline having passed, a further 600,000 people will now be eligible for the fourth and fifth grants as part of the Self-Employment Income Support Scheme (SEISS), including those who became self-employed in 2019-20. 

Business Rates Holiday Extension

The Chancellor confirmed the expected extension of the business rates holiday through to the end of June 2021 and, for the remainder of the year, rates will continue to be discounted by two thirds (up to a value of £2m for closed businesses, and a lower cap for businesses that have remained open). 

Super-Deductions

The Chancellor also announced the launch of the so-called “Super-Deduction”. For two years, businesses will be able to reduce their tax bill by up to 130% when they invest in new equipment. Explaining further, he said "under the existing rules, a construction firm buying £10m of new equipment could reduce their taxable income, in the year they invest, by £2.6m. With the Super Deduction, they can now reduce it by £13m”. 

Businesses will also be able to claim additional refunds of up to £760,000 by offsetting losses against their tax bills retrospectively up to three years. 

Recovery Loan Scheme

With the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) set to end in March, The Chancellor announced a new Recovery Loan Scheme. Businesses of any size will be able to apply for funding of between £25,000 and £10m through to the end of this year, with the Government providing an 80% guarantee to financial institutions to encourage lending. 

Restart Grants

The Chancellor announced a new £5bn Restart Grant Scheme, starting in April, designed to help firms that have been forced to close get back to business. Administered by local authorities, businesses will be able to apply for a grant of up to £6,000, whilst businesses in the hospitality and leisure industries, hit heavily by Covid-19 restrictions and expected to reopen last, will be able to apply for up to £18,000.

This will directly help businesses like shops, pubs, bars, nightclubs, restaurants, hotels, gyms, and salons. Local authorities will also receive £425m to support other businesses forced to close that are outside of these sectors.

Businesses in the Hospitality and Tourism sectors will also continue to receive a reduced VAT rate of 5% for a further six months, followed by a temporary rate of 12.5% for a further six months. 

Help to Grow Scheme

One of the most important tools in a business owner’s arsenal is knowledge, and the Chancellor is hoping that, with his new £520m ‘Help to Grow’ scheme, he can arm tens of thousands of SME owners with the training and support to grow their business and, ultimately, boost productivity and innovation. The Help to Grow scheme is made up of two parts:

Help to Grow: Management – thousands of business owners will be eligible for subsidised MBA-style management training covering everything from marketing to managing finances.

Help to Grow: Digital – will provide free, expert advice and discounts of up to 50%, worth up to £5,000 each, on software to help SME owners grow their business.

You can register your interest here. 

Boost to Traineeships Scheme

The Traineeships Scheme, which is designed to encourage employers to give young people work placements, has received a welcome boost. With unemployment levels at a five-year high, and young people hit particularly hard by job losses, the new measures will see employers who take on young apprentices rewarded further. Currently, businesses are eligible for a £2,000 sum for every apprentice under the age of 25, and £1,500 for every apprentice over the age of 25. This will now be increased to £3,000, irrespective of age.

In a further bid to bolster the job prospects of young workers, the Chancellor also announced the roll-out of new “flexi-job” apprenticeships, designed to give trainees the opportunity to have multiple placements with different employers within an industry, helping to develop their skills and sector-specific knowledge. 

Freeports

The Chancellor announced the creation of eight new freeports - East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool, Plymouth, Solent, Thames and Teesside. These areas will see special economic measures designed to make it easier to do business, improve transport links, and invest in infrastructure. 

£150m Community Pub Fund

Hospitality venues such as pubs have been ravaged by local restrictions, with research from the British Beer and Pub Association, British Institute of Innkeeping, and UK Hospitality suggesting that over 70% of pub owners fear permanent closure as a result of the pandemic. Today the Chancellor announced a new £150m Community Pub Fund, which will launch in the summer, and is designed to help local communities take over beleaguered pubs at risk of permanent closure. Under the scheme, community groups will be able to bid for funding of up to £250,000 to purchase local pubs and operate them as community-run businesses.

The planned increases in alcohol duties such as wine, beer, cider, and spirits will also be frozen for the second year in a row. 

£700m Extra for Arts, Culture, and Sport

The Chancellor also announced a boost to help arts-sector businesses such as museums, cinemas, theatres, and galleries to reopen. The Culture Recovery Fund, which already stands at £1.57bn will receive a further £400m. There will also be £325m of support for professional sport and grassroots football. 

How will the Government pay for these measures?

Firstly, the chancellor has announced that the lower rate income tax threshold will, as promised increase next year to £12,570, but will remain frozen at this level until 2026. Similarly, the higher rate threshold will rise to £50,270, but will remain at that level until 2026.

The thresholds for the pensions lifetime allowance, capital gains tax thresholds, and inheritance tax will also be frozen.

As has been widely reported, Corporation Tax (charged on company profits) will also rise from 19% to 25% from 2023 (still the lowest in the G7). The Chancellor has, however, taken steps to ensure that small businesses heavily affected by the pandemic are protected from the potential impact of this by the creation of the Small Profits Rate. 

Businesses with profits under £50,000 will see no increase in their Corporation Tax rate – with a tapered increase in line with company profits. In fact, the only businesses that will pay the full 25% Corporation Tax rate will be those with profits over £250,000. This means that around 1.4m businesses will see no change. 

If you'd like more information, you can view the full 2021 Budget here.

Header image by Andrew Parsons / No 10 Downing Street