Let’s start by acknowledging that it was a bit of a mixed bag. There was clear evidence that the government recognised we still have a long way to go in order to recover from the pandemic. Which is reassuring as we have only just dipped our toe in the water of moving out of restrictions!
However, there has also been the first sight of how the government will be seeking to recoup the cost of the various support packages. Including tax increases from April 2023. (Read the full government PR here).
With this in mind, let’s dive in.
Support for business
The Coronavirus Job Retention Scheme (CJRS) rolls on until September 2021. Furlough will now continue until September 2021 with the government continuing to make further gradual reductions from 1st July 2021.
Can you make use of the ‘Super-deduction’ tax break? Giving tax relief for companies that invest in new plant and machinery, this scheme is explained in full here. It’s designed to help encourage companies to invest in machinery that will help with future growth and expansion. *So if you’re thinking about buying any new machinery this month, it might pay to wait until April. Feel free to ask any of the team to check this if you’re not sure.
A total of £5 billion has been allocated to create one-off grants of up to £18,000 to help hospitality, accommodation, leisure, personal care and gyms across England.
The Recovery Loan Scheme has been set up to offer loans from £25,000 to £10 million for businesses who need support to recover from the disruption of the pandemic from the end of the current loan schemes. Further financial support in the form of invoice and asset finance is also available from 6th April 2021.
The much beleaguered hospitality, accommodation and attractions industry will benefit from a VAT cut to 5% until the end of September 2021 followed by a staged increase to 12.5% from October to March 2022 before returning to the full rate from 1st April 2022.
Support for sole traders and self employed
The SEISS has been extended to 30th September 2021 with a 4th and 5th grant now becoming available.
The 4th grant will be based on the 2019/2020 tax return, take account of 80% of the trading profits and be capped at £7,500. As with previous awards, you will need to meet specific criteria which can be found here.
The 5th grant covers from May to September 2021and is determined according to the change in your trading profits when comparing your tax returns for 2019/2020 and 2020/2021. If your trading profits reduced by 30% or more you can expect to qualify for 80% of your trading profit, capped at £7,500.
However, if your trading profit reduced by less that 30% you should expect to qualify for 30% of your trading profits capped at £2,850.
If you need help understanding if you qualify and how your profit will be assessed please contact a member of the team.
If you’re looking to hire an apprentice, you’ll be delighted to hear that the hiring incentive has been extended until September 2021 as well as an increased payment of £3,000 for those hiring apprentices between 1st April 2021 and 30th September 2021.
A new portable apprenticeship programme has been unveiled and £126 million made available to create 40,000 more traineeships in England.
All in all, some very good news for the so-called ‘kick start generation’.
Stamp-duty land tax reductions
The much hailed stamp duty ‘holiday’ was extended to June 2021 at which point the increases will be phased in with nil rate being applied up to £250,000 from 1st July 2021 to 30th September 2021 before returning to its former limit of £125,000 from 1st October.
Balancing the books
As mentioned at the start of this article, months of support, grants and loans cannot come without a cost and the Chancellor has revealed his plans for recouping the billions that has been paid out.
Most notably for business owners is the increase to Corporation Tax to 25% from 2023. This increase will apply to businesses with profits in excess of £50,000 and will be tapered from £50,000 to £250,000 so, in fact, only businesses with profits over £250,000 will pay the full increase.
Corporation tax will remain at 19% for businesses with profits under £50,000.
With regards to the Corporation Tax changes, the increase may affect you if you are planning to move from self employment to Ltd or LLP.
For owners of business that are already Ltd or LLP, you may wish to consider how it will be most beneficial for you to split the PAYE and dividend income from tax year 2023/2024. Naturally, the Accountancy Solutions team will be happy to assist in making the best decision for you.
If you have any queries about how the 2021 Budget will affect your business, please contact one of the team who will be happy to help you understand the changes and their implications.