After much speculation and spoilers, the chancellor has made his Budget 2021 statement. Below is our take on what it means for business owners across the UK.
Some of the major announcements include (further details on each below):
What’s also notable from this Budget is what didn’t happen. There are:
The furlough scheme has been extended until the 30th of September this year. People on furlough will continue to receive 80% of their wages for hours they don’t work until the scheme’s end. As the economy re-opens, employers will contribute 10% of wages in July and 20% in August and September.
Corporation Tax will rise from 19% to 25% from April 2023 for companies with profits of over £250k. For companies with profits under £50k, it will remain at 19%. If your profits are between £50k and £250k, it will be tapered, meaning you will pay at a rate somewhere between 19% and 25%.
From April this year, to stimulate investment in the short-term, it has been announced that purchases of machinery or other qualifying assets will receive 130% tax relief. The chancellor is calling this a Super Deduction. For example, if you buy a machine for £10k, you’ll get a deduction of £13k from your taxable profits. So if you’re thinking about purchasing an asset this month, it may be worth waiting a couple of weeks – come and talk to us.
Another related point is that otherwise-viable businesses that have been pushed into a loss-making position by COVID will now be able to carry back losses three years. This is a rather technical point – if you think this may apply to you, please talk to us about it.
The income tax Personal Allowance will rise with inflation as planned to £12,570 from April 2021 and will remain at this level until April 2026. The income tax Higher Rate Threshold (HRT) will rise as planned to £50,270 from April 2021 and will remain at this level until April 2026.
The Personal Allowance applies across the UK, and the HRT for savings and dividend income will also apply UK-wide.
The HRT for non-savings and non-dividend income will only apply to taxpayers in England, Wales, and Northern Ireland.
This will mean after this year, everyone’s take-home pay will be less in real terms as the thresholds will not rise with inflation.
From 1 April 2021, the amount of a payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times its total PAYE and NIC liability. This is more likely to affect those businesses that use external resources (not on their payroll) to carry out R&D. We’re looking into the details of exactly what this means.
The new scheme will replace CBILS and Bounce Back loan schemes that come to an end this month. The new scheme, open from April until the end of 2021, will offer loans of £25k to £10m with government guarantees for 80% of the loan. We’re awaiting further information on this scheme, such as whether or not you can apply for one of these loans if you have previously had a CBILS/Bounce Back loan. Watch this space.
There were a few announcements related to employing people:
There will be a fourth and fifth Self Employed Income Support Scheme grant. The fourth is due in late April and will cover the period February to April 2021. The fifth is due in July and will cover May to September. The fifth comes with restrictions based on the loss of turnover felt. There’s a bit of detail to this one; we’ve covered it here.
The Business Rates holiday will be extended for another three months until the end of June. This will be followed by a further nine-month period where rates will be discounted by two-thirds, up to a maximum of £2m for closed businesses. This applies to gyms and other non-essential retail businesses. If you previously qualified, it’s likely your local authority will liaise with you on this.
Restart Grants will be available in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality and other sectors that are opening later.
The reduced 5% rate of VAT for hospitality, accommodation and attractions is extended to the 30th September 2021 then will then rise to 12.5% until the 31st March 2022. It will return to 20% from the 1st April 2022
Finally, to keep us on our toes, the government is investing £100m in what they’re calling a ‘Taxpayer protection task force’, basically 1,000 additional tax inspectors!
There is lots to consume! There may be some things worth immediate consideration for your specific situation, such as the furlough extension, asset purchases, or home-buying. However, our headline advice remains to:
If there are any points here that you would like to discuss further, we’re only too happy to help.
Book a call at a time that suits you