Small businesses and the Autumn 2021 budget
Posted on 29th October 2021
Here we look at how the Autumn 2021 budget will affect small businesses as the Chancellor predicts the economy will grow by 6.5% this year, 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years.
The spending increases of over £150billion announced in the budget are the largest so far this century.
While the pandemic meant we have all faced unprecedented conditions, the Chancellor said that in normal times the state should only borrow to invest in our future growth and prosperity.
Investment
Despite hopes that the Enterprise Investment Scheme (EIS) to support investment in innovative businesses until 2025 would be made more attractive, no changes were announced in the budget.
However, a £1.4billion Global Britain Investment Fund is intended to encourage internationally mobile companies to invest in the UK’s critical industries, including the life sciences and the automotive sector.
A £150million fund at the British Business Bank will be available to encourage the development of regional networks of Dragons’ Den-style angel investors to help people start new businesses.
Business rates
The budget will certainly help many small businesses in retail, leisure, or hospitality with a 50% reduction in business rates until 2024 up to a maximum of £110,000. Business rate evaluations will take place every three years from 2023. It’s estimated that this step, which will include pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms will cost almost £1.7bn.
New investment relief is also planned to encourage businesses to adopt greener technologies like solar panels. Relief will delay business rate increases due to property improvements for 12 months.
Research and development
A target was confirmed of £22billion for spending on research and development (R&D) by the end of this term of parliament, in addition to R&D tax reliefs. This will increase public investment in R&D to 1.1% of gross domestic product (GDP) from 0.7% in 2018.
National Living Wage increase
As recommended by the Low Pay Commission, the National Living Wage will rise from £8.91 to £9.50 an hour for those aged 23 and over, which is an increase of 6.6% on the 2021 figures.
This will add £1,000 a year to the income of someone in a full-time role working about 35 hours a week.
Annual Investment Allowance extended
The £1m Annual Investment Allowance, due to end in December, has been extended to March 2023.
National Insurance to rise
It has already been announced that National Insurance rates for both employees and the self-employed will increase from April 2022 by 1.25%.
Training
£3billion will be available for young people aged 16 and over and for adult education, including skills 'bootcamps', T-levels and funding for special educational needs.
Generally…
Hopefully our work-related journeys will improve with £2.6billion for local road upgrades and a further £5billion for road maintenance. The planned rise in fuel duty will be cancelled too, saving van drivers around £30 per tankful and £130 for HGVs.
More widely there will be £11.5billion to build affordable homes and £4.7billion for schools to 2025. The Levelling Up Fund will also invest £1.7billion in over 100 areas to address regional inequalities by investing in the “infrastructure of everyday life”.
However, the Chancellor said that, while inflation in September was 3.1%, it is expected to be 4% on average over the next year. This, he said, was due in part to the pressure on global supplies and a surge in demand for energy around the world.
Talking about taxes, the Chancellor said: “By the end of this Parliament, I want taxes to be going down not up. I want this to be a society that rewards energy, ingenuity and inventiveness.”
Hopefully, that’s something we can all look forward to.
If you would like to review how these changes could affect your business, we will be happy to work with you to create some projections, so please get in touch.
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