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UK Budget 2021 – Summary and Reactions

by | Mar 10, 2021 | News

Last week, the Chancellor, Rishi Sunak has set out the Government’s economic plan for 2021. With the Spring Statement, he presented a long list of measures implemented by the treasury to both support businesses in the private sector, along with taking the first steps towards fiscal recovery from the Coronavirus financial strain the UK economy has been experiencing since March 2020.

First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
Second, once we are on the way to recovery, we will need to begin fixing the public finances… in today’s Budget we begin the work of building our future economy  ~  Chancellor, Rishi Sunak.

In this article, we will review the changes announced by the chancellor and cover some of the responses throughout the business community.

Support for businesses and grants

Job Retention Scheme (CJRS)

The Job Retention Scheme (also known as the furlough scheme) will be extended until 30 September 2021, while employees will continue to receive 80% of their salary, for hours not worked.
Employers will be required to contribute 10% of furloughed employees salary in July and 20% for August and September.
Additionally, National Insurance and pension contributions will continue to be covered by the employer.

The Job Retention Bonus and Job Support Scheme announced last year, will be postponed.

Self-Employment Income Support Scheme (SEISS)

The self-employment scheme will now be extended until September 2021, providing a fourth and fifth grant for those who are eligible.

The fourth grant

This grant will cover 80% of 3 months’ average trading profits and up to a single instalment of £7,500.
Your average trading profit and eligibility to claim a grant will be calculated according to your 2019 to 2020 Self-Assessment tax return, or according to previous tax returns, if you’re not eligible for a grant in your latest Self-Assessment return.

How to make a claim for the fourth grant?

If you’re self-employed and eligible for a fourth grant, HMRC should contact you in mid-April, providing you with a date on which you can submit your online claim, from.

The fifth grant

The grant will cover the period of May to September 2021.
Self-Employed businesses will be able to submit their claims from late July.
The fifth grant will be calculated by the reduction in turnover for the year April 2020 to April 2021.

  • Businesses which have suffered a reduction of 30% or more in trading profits, will be eligible for 80% of 3 months’ average trading profits, capped at £7,500
  • Businesses which have suffered less than 30% reduction in trading profits, will be eligible for 30% of 3 months’ average trading profits, capped at £2,850.

The Recovery Loan Scheme

Until 31 December 2021, businesses would be able to apply for guaranteed loans from £25,000 up to £10 million. The government will provide a guarantee of 80% to lenders.

Corporation Tax relief on trading losses

You can now carry-back trading losses of up to £2 million for three years, to reduce your corporation tax liability.

Super Deduction

Qualifying asset purchases between 1st April 2021 and 31st March 2023 will be eligible for additional tax relief, instead of claiming 100% of the cost against taxable profit, this is increased to 130%. However, on sale of the asset, 130% of the sale value will be added to your profits, increasing your tax liability.

Incentives increase for recruiting apprentices

The government has extended the incentive payments for hiring a new apprentice until September 2021, doubling the amount eligible businesses could claim, to £3,000.

Flexi-Job apprenticeships

Apprentices can also work with more than one business in a specific sector, under the new Flexi-Job Apprenticeships, scheme.

Statutory Sick Pay (SSP) for SMEs

In COVID-19 related sickness or absence of an employee, small and medium-sized employers can continue to claim back up to two weeks of SSP costs per employee.

Contactless payments

The limit on contactless payment is due to increase from £45 to £100.

Fuel tax

Duty on fuel to be frozen for the 11th consecutive year.

Freeports

To boost UK’s trade prospects and competitiveness in a post Brexit era, eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. These freeports will allow companies operating within them to reduce their tax liabilities and be eligible for more generous customs benefits.

First Infrastructure Bank to open in Leeds

A first national infrastructure bank, will be open in Leeds. It’s main function would be to invest billions in big infrastructure projects, aiming to tackle climate change.

Tom Riordan – CEO Leeds City Council

The Help to Grow scheme

The scheme provides companies across the UK with access to seminar and training sessions in top business schools, to help boost their management and digital skills.

Michelle Ovens – Founder, Small Business Britain

Dedicated support for the retail sector, hospitality and leisure

The Restart Grant

Non-essential businesses from the retail sector would be eligible for a grant of up to £6,000 per premises, to help them reopen and kickstart their business operation again.
Similarly, hospitality and leisure businesses will be eligible for a single grant of up to £18,000.

Business rate holiday extended

The 100% business rates discount announced last year, for the retail, hospitality and leisure sector will be extended to June 2021.
Additionally, business rates for these sectors will be reduced by two thirds until the end of the current financial year.

VAT reduction for the hospitality sector

The 5% discounted VAT rate announced last year will be extended until 30 September 2021. It will be increased to 12.5% until April 2022, before returning to the standard rate of 20% from April next year, onwards.

Alcohol duty to be frozen

Recognising the challenges ahead for the hospitality sector, the chancellor has confirmed that the planned rise on alcoholic beverages will be cancelled for the second year in a row.

Fiscal Recovery

Corporation Tax

The current corporation tax rate of 19% will be increased to 25% by 2023. This increase will only affect businesses with profits higher than £50,000 and will be charged at the 25% rate for companies with profits higher than £250,000. Companies with a profit between £50k and £250k will pay tax at a marginal rate

The chancellor has also introduced a Small Profits Rate which will allow businesses with profits lower than £50,000 to keep paying the current 19% corporation tax rate.

Corporation Tax relief on trading losses

You can now carry-back trading losses of up to £2 million for three years, to reduce your corporation tax liability.

Claer Barrett, Consumer Editor – Financial Times and Andrew Bounds, Enterprise Editor – Financial Times discussing the new, ‘Small Profit’, Corporation Tax rate.

SME payable R&D tax credit

Previously, eligible SMEs could have claim up to 14.5% of their R&D element to cover business losses. However, this has been limited to £20,000 plus 300% of the company’s total PAYE and NICs liability.

IR35 and Off-Payroll Reform

There was no mentioning in the chancellor’s speech about delaying the IR35 reform once again. This means that as of now, the new IR35 rules will take effect on 6 April 2021.

IR35 - read more about it

Find out what changes are coming, how this could affect you and what we can do to help.

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