Another Budget speech has been and gone. The Chancellor, Rishi Sunak stood up on 3rd March and let us know his plans for the country’s finances.
In this blog we give you a quick summary of the key ‘highlights’ for business owners. We will cover the points individually and in more detail over the coming weeks as further information emerges.
More self employed grants are on the way (‘SEISS’)
There will be a 4th SEISS grant as planned. This grant will be for 80% of your ‘average trading profits’, paid in one lump sum (3 months’ worth).
The big news is that HM Revenue & Customs will now take your 19/20 tax return into account when working this out, although they will average your trading profits over 4 years (previously 3 years).
This could mean your grant is higher or lower than before!
You will be able to apply for this grant in ‘late April’. There are many conditions for this fourth self-employed grant that we will cover in more detail in the coming weeks.
There will then be a 5th Grant worth either:
- 80% of your average monthly trading profits (3 months worth)
- 30% of your average monthly trading profits (3 months worth)
If your turnover has gone down by 30% or more, you get the 80% grant. If not not, you get the 30%.You can apply for this fifth SEISS grant from ‘late July’.
The other criteria for getting the grant remain roughly the same: see our previous SEISS grant blog.
The Coronavirus Job Retention Scheme (a.k.a the Furlough Scheme) is extended
Furlough pay will continue to be 80% for employees, but from 1st July 2021, employers will need to contribute some money.
Initially this will be 10%, so 10% from your employer and 70% from the government). From 1st August this will rise to 20% (so 20% employer/60% government).
The employer still needs to pay pension and employer’s NI costs (where applicable).
Your company will pay more tax from April 2023 (probably)
Corporation tax (a.k.a for most people, ‘limited company tax’) is due to rise from 19% to 25% from April 2023.
Profits under £50,000 will still be taxed at 19%. There will be a gradual step up (known as ‘tapered rate’) for profits between £50,001- £250,000. So it’s only really when you have profits over £250k that you will pay this new rate.
NEW! Super Deductions for companies
It’s not all bad news on tax! To offset this there will be a new ‘Super Deduction’ only available to companies.
We are awaiting full details, but this Super Deduction scheme appears to work in a similar way to how you can currently buy (say) a piece of computer equipment, and knock the whole amount off your profits before you get taxed.
The new scheme will allow you to knock off 130% of the cost, rather than then current 100%. More examples to follow soon, so you can picture Super Deductions in action.
One other possible bonus is that if you have losses, you can now send them ‘backwards’ further against older years profits, which could get you a tax repayment.
- Read the Gov.uk detail on corporation tax rates HERE
- See the latest Gov.uk ‘detail’ on Super Deduction HERE
- Wade through the Gov.uk draft law on the Super Deduction (for any mega geeks) HERE
You won’t pay more personal tax
The Chancellor has fixed the rates of tax for tax and National Insurance until April 2026(!).
This means you can earn (from April 2021)
- £12,570 a year tax free
- £9,568 before paying National Insurance
- Up to £50,270 before having to pay the higher rates of tax (40% in employment, 32.5% in dividend tax)
- Read the Gov.uk detail on personal income tax and NI thresholds HERE.
5% VAT rate on your dinner out has been extended
For businesses in the hospitality sector (pubs, restaurants, hotels, campsites, etc) the low 5% VAT rate is here to stay a little longer.
The 5% rate of VAT will run until 30th September 2021. From October it will then rise to 12.5%, and return to 20% from 1st April 2022.
The Recovery Loan Scheme’ is being launched from 6th April 2021
A new Recovery Loan Scheme is being opened where the government are guaranteeing 80% of the loan to encourage banks to lend.
As a result, no personal guarantees are needed for loans up to £250,000.
This scheme is not like Bounce Back loans; you will need to prove you have a viable business were it not for COVID.
New business rate grants and ‘holiday’ extension for those forced to close
The Chancellor announced a new grant linked to business rates (for businesses with premises) in the form of a ‘Restart Grant’. At the time of writing the details are minimal, but it is expected to be:
- Up to £6000 for non-essential retail
- Up to £18,000 for gyms and similar businesses that are to re open later
These will be applied for and issued by local councils, similar to the previous grants.
There was also an announcement that the 100% business rate holiday for these businesses will continue until the end of June, with further discounts in the following 9 months.
- More detail as it comes. Stay tuned!
Interesting info on your staffing costs
If you hire apprentices, you can currently apply for an ‘incentive payment’. We’ve covered this in a previous blog on apprenticeships HERE.
The Chancellor announced he is ‘doubling these payments to £3000’, for apprentices of any age. We await the detail on this to see how it interacts with the existing scheme detail.
The National Minimum (and Living) Wages are rising from April 2021. The living wage will now be £8.91.
More news as it comes!
So there you have it, our quick summary of the major Budget 2021 news for business owners.
Be sure to check out our YouTube Channel for our video on the Budget.
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