As you will undoubtedly know, this week saw the announcement of the 2021 Spring Budget. Whilst the measures introduced were not quite as drastic as we were all expecting, there was still a lot to unpack in the Chancellor’s announcement, especially with regards to small businesses. This article will try to explain the most important changes from the Budget, such as updates to the coronavirus support and corporation tax. Please do not hesitate to get in contact via our social media should you have any questions about any of the policies outlined in this article. Without further ado, here’s all you need to know about the implications to your business from the 2021 Spring Budget.
SEISS, The Job Retention Scheme & Other Schemes In The Budget
It will come as a relief to many employers to find out that the Job Retention Scheme has been extended to September, amongst other support for businesses. This means the Government will continue to pay 80% of the wages of your furloughed employees. However, they will not cover the complete costs of this 80% from July.
In July, the government are requiring businesses to cover 10% of these costs, rising to 20% in August and September as the economy reopens. For an employee to be eligible to receive the grant they must have been registered as an employee before the 3rd of March.
As an employer, you have until the end of March to apply for this scheme. This deadline also applies to various other schemes such as the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme. Applications for this scheme were originally meant to close in January but have been extended to the end of March.
At the Budget it was also confirmed that the fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged.
The UK government has also announced that there will be a fifth and final grant covering May to September. You will be able to claim from late July if you are eligible for the fifth grant. The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.
The fifth grant will be worth:
- 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
- 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%.
The Help To Grow Scheme was also announced, which we have already compiled an article on for you.
Corporation Tax
As many of you will have anticipated, the Budget included a hike in corporation tax. However, this will not come into effect until 2023. The rate of Corporation Tax paid on company profits will increase to 25 per cent – but with some crucial protections:
- the new rate won’t be introduced until April 2023
- small businesses with profits of £50,000 or less will continue to pay the current 19 per cent rate
- the rate will then be tapered up, depending on business profits – only businesses with profits of more than £250,000 will pay 25 per cent
The Chancellor says that this means only 10 per cent of all companies will pay the 25 per cent rate.
There was some good news for those of you who have had businesses with property to offset this increase though; This has come in the form of Restart Grants, which are thought to be worth around £5bn
The Restart Grant scheme, administered by local councils, will help almost 700,000 small business owners including those running shops, pubs, clubs, hotels restaurants, gyms and hair salons.
Non-essential retail businesses will get up to £6,000 per premises through the Restart Grant scheme to help them reopen. Shops will reopen no earlier than April 12, according to the Government’s Covid-19 roadmap. If you own a business that operates on a given property and you have been heavily affected by the pandemic, you should be eligible to apply.
Other Points Of Interest In The Budget
There was more support for businesses, as is evidenced by the reduced VAT rate for hospitality is also set to continue. This means VAT for the hospitality sector will be set at 5% until September. After that, VAT will be set at 12.5% for these companies until March 2022, when it will return to its normal rate.
As we have pointed out in previous articles, these companies are also due to pay back any VAT they postponed between March and June last year by the end of this month. The budget reaffirmed this deadline, but also let those affected know that they will be able to pay their owed VAT back in instalments over 11 months. If you are interested in this support for your business, find out more about it in this previous article.
There was also the announcement of 8 new ‘Free Ports’. Businesses located within the freeports will benefit from tax breaks including no stamp duty, full rebates for construction and machinery investment, five years of zero business rates, and lower tariffs and customs obligations.
Most of the zones will be based around England’s biggest coastal cargo ports, including Felixstowe, Liverpool, Hull, Southampton and London Gateway. Plymouth, Teesside and a zone around East Midlands airport will also be designated areas.
Conclusion
The main theme of this budget seems to have been support for businesses in the last round in the battle against the coronavirus. Whilst this is obviously good news, it is likely we will see more tax hikes in the next budget announcement, so take advantage of these government schemes while you can!
As mentioned at the beginning of the article, please feel free to get in contact with us if you have any questions about any of these schemes, or how to apply to them. At J&P, helping small businesses is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to enquiries@jpaccountant.com.
