Budget 2021 impact for small businesses
Posted on 4th March 2021 at 16:13
Corporation Tax – corporation tax will increase from 19% to 25% in 2023 for companies with profits of £250,000 or more. It’s estimated that each 1% increase raises an additional £3.4 billion towards the costs of the pandemic. However, businesses with profits of £50,000 or less will continue to pay 19%.
Businesses will be able to offset their tax liabilities against losses over the last three years, up to £760,000.
Super tax deductions – the Budget has introduced a new super deduction scheme that will allow business to reduce their tax liabilities by 130% of the cost of new investment.
Online businesses – the anticipated increase and expansion of the Digital Services Tax (DST) wasn’t included, nor was the rumoured new ‘green tax’ on every internet delivery.
Retail and hospitality – £5billion will help retailers, hospitality, and other businesses in England seriously affected by the coronavirus measures. Grants will be available of up to £18,000 per company to support them as they reopen when lockdown restrictions are eased.
Shops, restaurants, hotels, hair salons, gyms and other affected businesses will be eligible for ‘restart grants’ that will be distributed by local authorities from April, replacing the current monthly grants.
A new version of the ‘Eat out to help out’ scheme will also be available as people start to return to pubs and restaurants.
There will also be funding for community groups to help them take over local pubs and keep them running as part of a wider scheme to support sports clubs, music venues and theatres.
Income tax – the threshold for income tax will be frozen from next year until 2026 at £12,570 for the basic rate and £50,270 for the higher rate.
Training – there is £126million for six-week to six-month traineeships and a flexi-job apprenticeship. This will include up to twice the cash incentive currently offered to businesses that take on apprentices, regardless of age.
There will also be over £500million available for a ‘help to grow’ initiative providing businesses with software and training to improve productivity.
Furlough – the scheme, which had been extended but was due to end in April, has been extended again until the end of September. Businesses will be asked to contribute 10% of furloughed employees’ wages in August and 20% in September.
Self-employed – many self-employed people who weren’t previously eligible are expected to qualify for grants. To access the Self-Employment Income Support Scheme (SEISS) grants worth 80% of three months’ average trading profits, capped at £7,500, claimants previously had to provide their 2018-19 tax returns. As tax data for 2019-20 is now available, more self-employed people are expected to qualify for a fifth wave of the grant.
Business rates – relief from business rates for the hospitality, retail and leisure sectors has been extended to the end of June and discounts of up to 66% will continue until April 2022.
VAT – the 5% VAT rate for tourism and hospitality businesses will continue until the end of September. It will then go up to 12.5% until April 2022, when it will return to 20%.
Personal support – the £20 weekly increase in Universal Credit has been extended until the end of September.
Growth funding – coronavirus business loans will be replaced with a new recovery loan scheme, 80% of which will be guaranteed by the government. Loans between £25,001 and £10million, and asset and invoice finance between £1,000 and £10million, will be available to businesses of all sizes.
If you would like to review your business finances following the Budget announcements, please get in touch.
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