The 2021 Budget has been one like no other, following hot on the heels of Brexit, and with many businesses continuing to struggle after the impact of the pandemic.
The Chancellor has attempted to offer ongoing help by relieving companies under pressure whilst trying to set the economy on a path to investment-led recovery. Although some of the predicted changes have been delayed or simply have not materialised, the Government seems to be offering the self-employed and business owners more support, placing them at the heart of the recovery.
Chancellor Rishi Sunak used the Budget to outline his ‘three part plan’ towards economic recovery – supporting those still struggling, paying for the response, and investing in the future economy.
Some of the positive announcements include:
Small businesses exempt from the corporation tax hike
Any small business with profits of £50,000 or less will be exempt from the corporation tax increase to 25% from 2023 - around 70% of companies. A tapered rate will be introduced for profits above £50,000, so only businesses with profits of £250,000 or more will be taxed at the full rate.
Grant funding will be available to businesses in England through a new £5 billion Restart Grant scheme to help the high street get back on its feet. This will provide up to £18,000 for leisure and hospitality businesses and up to £6,000 for non-essential retail.
Help to Grow scheme
Over 130,000 SMEs will be supported through the new Help to Grow scheme, which will provide digital and management tools and training. Any small business can apply for a £5,000 grant to pay for Government-approved productivity software.
Self-Employment Income Support Scheme
The Self-Employment Income Support Scheme (SEISS) will?continue with a fourth and a fifth grant. Sunak announced over 600,000 people (many of whom became self-employed in 2019-20) may now be able to claim direct cash grants under SEISS. However, self-employed company directors who pay themselves in dividends rather than PAYE were excluded from this support.
Recovery Loan Scheme
The new Recovery Loan Scheme was announced, designed to replace the existing Government-guaranteed financial support schemes that close at the end of March. The Recovery Loan Scheme is scheduled to run until 31 December 2021 (subject to review). The maximum value of a facility provided under the scheme will be £10m per business, with no turnover restriction for businesses accessing the scheme. Businesses will be able to choose from a variety of products: term loans, overdrafts, asset finance and invoice finance facilities.
Business rates holiday
The business rates holiday in England has been extended by three months - a huge relief for the retail, hospitality and leisure sectors in particular. Properties in this sector in England will pay no business rates for three months from April 1st when combined with Small Business Rates Relief, with further relief available for the rest of the year.
Reduced VAT for hospitality
The Government has also extended the temporary 5% reduced rate of VAT in the hospitality and tourism sectors until September 30th 2021. To help these businesses successfully transition back to the standard rate, a rate of 12.5% will then apply for another six months.
There are still many challenges ahead in the road out of the pandemic, and although these measures can help, businesses need to be cautious.
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