What does Budget 2021 mean for small business owners?

The March 2021 Budget contained a wide range of announcements that will affect businesses of all sizes. Here, we outline the main measures which affect individuals, the self employed, and limited company owners.

The HM Treasury Budget page is here.

Covid support schemes extended

Both the main CJRS furlough and SEISS self-employed grants schemes will be extended until the end of September, although the Government’s contribution to the final three months of each scheme will be less generous.

Under the terms of the extended CJRS, employers to be asked to contribute 10% in July and 20% in August and September of the existing Government contribution.

An additional 600,000 people will be eligible for grants 4 and 5 under the self-employed SEISS. However, controversially, many ‘excluded’ businesses have been overlooked, once again. Many limited company directors, for example, have been unable to access funds based on the dividend income they earned prior to the COVID outbreak.

The fourth SEISS grant (worth up to 80% of trading profits, or £7,500) will cover February until April. A fifth (and final) grant will cover May until September. This time, however, the terms are less generous.

If your turnover has fallen by 30% or more, you will qualify for the full 80% grant, but if your turnover has not fallen by as much as 30%, you will only qualify for a 30% grant. Quite a sizeable difference.

Help for homeowners

The Stamp Duty holiday will be extended until the end of June, and the nil rate band will apply to new house purchases of up to £250,000 until the end of September.

A new 95% mortgage guarantee scheme will be introduced for first-time buyers of homes worth up to £600,000.

Corporation Tax will rise to 25% in 2023.

The main rate of Corporation Tax will increase to 25% in 2023, with a new system of tapered relief which will apply to firms whose annual profits are between £50,000 and £250,000.

There will be no change to the 19% rate for profits below £50,000, and the new relief system will apply to profits between this and £250,000. You can read the HMT briefing document here.

Help to Grow scheme

This is a new initiative to help around 130,000 SMEs with up to £5,000 of funding for digital and management training and resources.

Corporation tax ‘super deduction’ for investments

To encourage investment, companies will be able to invest in new investments and reduce their exposure to Corporation Tax by 130% of the cost of the investment.

This incentive is expected to be worth £25bn to firms over the next two years.

Business rates relief

The current business rates holiday in England has been extended until the end of June. Over 3/4 million businesses will pay no business rates at all over this period when combined with the Small Business Rates Relief scheme.

You can find out more about business rates relief here.

VAT relief for the hospitality and tourism industry

The VAT cut to 5% for affected businesses will remain in place until the end of September. It will return to the standard 20% rate in April 2022, and a mid-way 12.5% between these dates.

‘Restart’ grants for high street businesses

The Government has put aside £5bn to help high street firms get restarted after the Coronavirus restrictions have eased. 700,000 businesses are expected to be eligible for grants of up to £6,000 (non-essential retail) and £18,000 (hospitality).

New ‘Recovery Loans Scheme’

When the current Bounce Back Loans and CBILS loan schemes come to an end later this year, a new business loan scheme will be launched, providing between £25,000 and £10m of capital to firms affected by the pandemic.

Most personal tax rates will be frozen

The current rates of VAT, income tax and National Insurance will not be changed. The inheritance tax threshold will remain at £325,000 until the end of 2026. The VAT registration threshold remains at £85,000.

ISAs, Pensions

The current £20,000 adult ISA limit will be frozen, as will the pension lifetime allowance (it will remain at the current level – £1,073,100).

Personal tax thresholds to be frozen until 2026

The personal allowance will rise to 12,570 in April 2021 but remain frozen for five years beyond this.

The higher rate income tax threshold will increase to £50,270 from April 2021, and remain frozen until 2026.

Other relevant measures

Here are some other announcements for both individuals and small business people:

  • Fuel duty will be frozen in 2021/22
  • Alcohol duty will be frozen in 2021/22

Last updated: 20th April, 2021

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