Budget 2021

The Chancellor has just announced the government’s budget for 2021. It is an important one as the national debt is at record levels and the country is still facing lockdown conditions with many small businesses struggling or closed. I have written this review of the budget to focus on the issues that affect small business owners like myself. I hope you also find it useful.

Overall, the government extended many of the already existing Covid measures and detailed how and when they were going to be scaled back. Debt is moving towards 100% of GDP so tax rises were also announced for the longer term.

The key takeaways for small business owners were the following:

·        In April 2023 corporation tax will increase to 25%. There will be a small business rate at 19% and this will be for the first ￡50k of profits. There will be a taper above ￡50k and it will only be companies that make profits over ￡500k that will be fully taxed at the 25% rate.

·        For the next 2 years when a company invests, they get a super deduction from profits of 130% on the cost of that investment.

·        Company tax losses of up to ￡2m can be carried back for up to three years as opposed to the standard one year currently.

·        Personal tax thresholds are frozen at ￡12,570 until April 2026, the higher rate band of ￡50,270 was also frozen until April 2026.

·        Other IHT, CGT and pension bands frozen until April 2026.

·        Furlough was extended to September and is being wound down from July. Employees keep getting 80% but businesses will need to contribute 10% in July, 20% in august and September.

·        Further grants for self-employed were announced. A 4th grant to April and 5th grant to July. The amount of grant is dependent on the size in the fall in turnover.

·        The newly self-employed that have now filed their 2020 tax returns will also be eligible to the self-employed 4th and 5th grant.

·        A new restart grant was announced to start in April to help business that have been forced to close due to lockdown. Non-essential retail will get a grant of up to ￡6,000. Leisure and hospitality will get up to ￡18,000.

·        The national living wage to increase to ￡8.91 from April.

·        A doubling of the apprenticeship grant to ￡3,000 for any new apprentice was announced.

·        A new recovery loan scheme is to replace the bounce back loan. These are for loans of ￡25k -￡10m in this year and the guarantee to lenders will be 80% of these.

·        Business rates holiday to continue at 100% up to end of June, then up to March 2022 discounted by two thirds.

·        5% reduced rate VAT is to continue until 30th September, then go to 12.5% until the start of April 2021.

·        Alcohol duty and fuel duty rises cancelled.

·        Stamp duty cut to continue to 30th June, then nil rate band will be ￡250 until the end of September.

Other things were announced such as a guarantee for first time house buyers, the creation of a UK infrastructure bank to invest in public and private projects and grants directed to the arts. However, the above are the key items that I believe will impact the small business owner.

I hope you have found the above useful, if you have any questions or want to discuss the budget with me then please feel free to contact me. [email protected]