Rishi Sunak delivered the Budget 2021 announcement earlier this week in the House of Commons. Here’s our breakdown on what was said and how this affects your business.
This year’s budget announcement has been widely anticipated by many. It’s no secret that covid-19 has had a severe impact on the UK’s economy, with the country reaching the highest year of borrowing since WW2.
Budget 2021 – What did it cover?
This year’s Budget focused on recovery, highlighting continued covid-19 support, protecting jobs and livelihoods, strengthening the public finances and an investment-led recovery.
Budget 2021 – What loans, grants and schemes were announced?
Recovery Loan Scheme
Businesses of all sizes will also be able to apply for a new Recovery Loan Scheme, with available borrowing between £25,001 and £10million, and asset and invoice finance between £1,000 and £10 million.
Our Founder, Matt Portt, gave his thoughts on the new Recovery Loan Scheme:
“This loan scheme can be used even if you have a bounce back loan (BBL) or CBILS, so this is positive. Businesses who took out a BBL but need further borrowing should still consider applying for a CBILS loan to replace the BBL by the 31 March deadline, as doing so will qualify them for a further 12 months of interest paid by the Government and no repayments. BBLs will remain the cheapest option and can be repaid over 10 years but are subject to the £50k cap. Small businesses should be aware that if they were previously decline a CBILS loan due to the ‘Undertaking In Difficulty’ test, this was subsequently relaxed and so they should reassess their eligibility.”
Carry Back Losses
In order to support cashflow, businesses will be able to carry back losses from the pandemic of up to £2 million for 3 years.
“This will be very welcome news who have previously made significant profits but have large losses due to COVID. As 31 March is approaching, such businesses should consider a specific bad debt provision against doubtful debts to maximise the loss available to carry back.”
Matt Portt, Founder of Portt & Co
Extended reduced VAT rate for the hospitality and tourism sector
To continue supporting businesses in the hospitality and tourism sector, the reduced VAT rate of 5% has been extended to September. An interim rate of 12.5% will follow this for a further 6 months.
Restart Grants
Non-essential retail, hospitality, leisure, accommodation, personal care and gyms will be able to apply for new Restart Grants. Depending on the type of business, the Restart Grants range from £6K-£18K.
Furlough extended to September 2021
The Coronavirus Job Retention Scheme (CJRS), known to many as furlough, has now been extended to September 2021. Employees will continue to receive 80% of their salary for hours not worked, with employers being expected to contribute 10% in July and 20% in August and September.
“What was notable was the absence of the mention of the Job Retention Bonus that was pulled in November. That was a pledge many businesses built into their budgets to bring people back to work full-time and seems now to have been lost forever.
That said, most businesses would prefer the longer-term certainty of flexibly furloughing workers until September. I especially welcome the news that employees included on an RTI submission by 2nd March 2021 can now be furloughed.”
Matt Portt, Founder of Portt & Co
Budget 2021 – How will this affect apprentices and traineeships
In order to grow our jobs market and develop our future leaders, an extension to the apprenticeship hiring incentive has been granted until September 2021, with a payment increase of £3,000.
Additional budget has been set aside to fund 40,000 new traineeships in England. Providing funding for 16-24 year olds to access high quality training and work placements in 2021/22.
When will Corporation Tax increase?
Amongst the announcement of cuts came the news of an increase to Corporation Tax. Fortunately, the increase to 25% is not due to take effect until 2023 and will only apply to companies with profits of £250,000 and greater.
Businesses with profits of £50,000 or less will continue to be taxed at 19%, with a taper for above £50,000 to ensure only those with profits above £250,000 will be taxed at the highest rate.
“Electric Vehicles have a benefit in kind rates at 1-2% with improvements and range, business owners should consider sourcing an electric vehicle through their company, especially if they will soon pay a higher rate of corporation tax. This is an area I have followed my own advice on.”
Matt Portt, Founder of Portt & Co
Budget 2021 – What is Help to Grow?
In Rishi Sunak’s Budget 2021 announcement he mentioned an investment-led recovery, including the new Help to Grow scheme. Up to 130,000 companies across the UK will be able to benefit from the scheme offering a digital and management boost.
Under Help to Grow Management, small and medium sized businesses can access a 90% Government funded 12-week programme. This will cover leadership, innovation, digital adaption, employee engagement, marketing, responsible business and financial management.
The Help to Grow Digital scheme sees eligible businesses receive impartial advice on how technology can boost performance, alongside a discount of up to £5,000 on approved software. To qualify, you must be:
- Registered with Companies House
- Employ between 5 and 249 employees
- Have been trading for more than 12 months
- Are purchasing the discounted software for the first time
What about the Excluded?
In this week’s Budget 2021 announcement we’ve seen additional support given to the self employed, but still nothing for the almost 3 million tax payers who have been excluded from support for 12 months.
“We welcome the fact that those completing a 19-20 tax return are now eligible for the self-employed grant, but I find it incredulous that business owners who remunerate themselves through dividends have been overlooked again. Mel Stride, the Chair of the Treasury also expressed his disappointment on this, stating that he believes the committee had presented workable solutions. These are not tax dodgers, if a business owner pays themselves through PAYE then they suffer employers NI – a tax to employ themselves, which is sensibly avoided via dividends. These are the job creators and burdening them with debt will seriously limit growth in small businesses.”
Matt Portt, Founder of Portt & Co
Budget 2021 – How we can help you
In order to efficiently and effectively run your small business, you need accurate, timely data to make informed financial decisions. We provide a range of outsourced finance options, ranging from a remote Finance Director, Bookkeeping and Management Accounts, Payroll and a full Finance Department service.
Complete our easy form and let us know what services you require and we’ll get in touch to discuss further.