On the 3rd March 2021, Rishi Sunak unveiled his budget statement for the financial year ahead – something many business owners will have been watching closely. And to help build back the economy, the Chancellor has set out an extra £65bn in COVID support.
To help you figure out how the budget will affect your business, we’ve summarised what financial support will be available to you following this announcement and a few other important pieces of information on how your business will be affected.
1. Furlough Extension
It’s strange to think that furlough wasn’t even part of the budget statement last year – this now-household term came into play during the whirlwind that was (and still is!) the Coronavirus pandemic.
Furlough is part of the government’s Coronavirus Job Retention Scheme, and it allows employers to put employees on temporary leave and pays 80% of those employees’ wages, saving a lot of money for businesses that are struggling to cope financially in the face of COVID-19.
This scheme was set to finish at the end of April, but has now been extended to September – helping businesses get back on their feet even beyond the date in June the government outlined in their roadmap as being the end of all Coronavirus restrictions.
Employees will be asked to contribute 10% towards furlough pay from July, and 20% from August as the scheme is gradually phased out.
2. Restart Grant for Small Businesses
A £5bn restart grant scheme will be set up to support small businesses at the heart of the high street. Hospitality businesses, hotels, gyms, personal care and leisure facilities will be able to apply for grants of up to £18,000, whereas non-essential retailers will be limited to £6,000 of support due to opening up earlier in the lockdown roadmap.
3. New Loan Scheme
As the government-backed bounce back loan (BBL) and coronavirus business interruption loan scheme (CBILS) reach their end, the Treasury has announced that they are launching a new loan scheme which will be in place until the end of the year. This scheme will allow loans between £25,000 and £10m.
4. Discounted Businesses Rates
As part of a £6bm tax cut, retail, hospitality and leisure businesses will pay no business rates for three months (until the end of June), which is a continuation of the business rates holiday. For the remaining nine months of the financial year, rates will be discounted by two-thirds.
5. More Support for Self-Employed
As the access to grants is widened, 600,000 more self-employed people – many of whom lost their jobs due to the pandemic downturn and began their own businesses in lockdown – will become eligible for government help as long as they filled in their tax return for 2019-2020 by midnight last night.
In his statement, Chancellor Rishi Sunak revealed that there will be a fourth grant available for the self-employed worth £7,500 to cover a loss of earnings between February and April, and a fifth that will come into play in May as an extension of this. The fifth grant will last until September.
Like the previous grants, these grants will be part of the self-employment income support scheme (SEISS) and applications will open shortly. You can find out exactly how they work here.
6. Small Businesses to Pay Lower Rate of Tax
Corporation tax (which is paid on company profits) will be rising quite a bit from 19% to 25% in 2023, however there will be some protections in place for smaller businesses.
Businesses with profits of £50,000 or less won’t be affected by this rise in corporation tax and only businesses with profits of £250,000 or more will be taxed at the full 25% - with everyone else falling somewhere in the middle.
7. Reduced Rate of VAT Extended
The 5% reduced rate of VAT for the hospitality industry will be extended until the end of September. It will then be gradually increased at 12.5% for six months before returning to the standard rate from April 2022.
8. Two-Year Super Deduction Scheme
In a bid to get companies investing in their own growth, Sunak also unveiled a two-year ‘super deduction’ scheme, whereby companies will be allowed to reduce their tax bill by 130% of the cost of new investments.
As an example, Sunak 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. We've never tried this before in our country."
9. Contactless Card Limit Increased to £100
As part of the 2021 budget, the Treasury also confirmed that the limit on a single payment using contactless card technology will rise to £100 later this year.
The pandemic has seen many businesses rejecting cash and instead encouraging shoppers to use card or contactless payments for public health reasons. It’s been less than a year since the limit you could pay on a card was increased from £30 to £45, but it is now set to be increased to £100.
Overall, it seems that the Chancellor’s plans involve supporting businesses and getting them back on their feet in the short term, with future plans for repairing the damage the Coronavirus pandemic has wrought on the economy. We’ll keep this article up to date in the coming days with any new information that will be useful for your business.