Budget 2021: Employment, opportunity and repairing the economy
This afternoon Chancellor Rishi Sunak delivered his second Budget, addressing the ‘acute damage’ that the Coronavirus pandemic has caused.
The new measures announced today fall into a three-part plan: supporting business and people throughout the pandemic, fixing public finances and building the future economy.
Here’s what the Budget means for businesses:
As expected, Mr Sunak announced a further extension to the furlough scheme, which will see it running until the end of September. While employees on furlough will continue to receive 80% of their wage until the end of the scheme, changes will see businesses expected to contribute 10% of this from July, rising to 20% in August and September.
Further support lasting until September has also been announced for the self-employed through a fourth and fifth grant, with eligibility being extended to include an additional 600,000 self-employed people.
The previous focus on employment and decent job opportunities continues, with an increase to the national living wage planned in April and the restart programme, kickstart programme and lifetime skills guarantee continuing.
The incentive for businesses taking on new apprentices has increased to £3,000, double the amount that was previously on offer.
Businesses are being offered a new restart grant to help them reopen and get going, with non-essential retail businesses eligible for up to £6,000 per premises, and hospitality and leisure businesses eligible for up to £18,000.
There is also an additional £700 million to be allocated to supporting the arts, culture and sports sectors.
The chancellor also announced a new loan scheme, which will replace the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme from 1st April.
The new Recovery Loan Scheme will enable eligible businesses to apply for between £25,000 and £10 million, with an 80% guarantee to lenders to encourage applications being accepted. Funding can be provided in the shape of loans, overdrafts, invoice finance and asset finance, with no personal guarantees taken on facilities up to £250,000.
Further details about this scheme and the accredited lenders will be announced in due course, but it underlines the importance for businesses to explore their options – especially those with a CBILS loan and due to commence repayments shortly.
Businesses will also continue to benefit from the 100% business rates holiday until the end of June, and for the remaining nine months of the fiscal year will see a discount of two thirds, up to £2 million for closed businesses. VAT reductions in the hospitality and tourism sector have also been extended, and will remain at the current 5% for another 6 months, before rising to 12.5%, and only reaching the pre-pandemic 20% in April 2022.
But Corporation Tax is increasing
While Mr Sunak made it clear that financial support would continue for both businesses and individuals while the pandemic is still disrupting everyday life, he also pressed the importance of taking steps towards rebuilding financial stability in our economy.
He emphasised that these steps would aim to be fair, focused on asking more of those who can afford it, rather than burdening those who are already struggling.
As such, Corporation Tax is scheduled to increase from 19% to 25% for businesses with profits of more than £250,000 from April 2023. However, businesses with profits below £50,000 will not be affected by the increase, with a tapered system in between. Mr Sunak said this would mean only 10% of all companies will pay the higher rate.
Importantly, he announced businesses will be able to carry back losses over a three-year period.
In order to encourage businesses to invest, a new super deduction was announced. This will allow companies investing in qualifying new plant and machinery to reduce their tax bill by 130% of the cost of their investment.
From 1 April 2021 until 31 March 2023, businesses will be able to claim:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets
Read more here about the funding options available to businesses to help finance the purchase of new plant and machinery.
Meanwhile, a new infrastructure bank is being set up in Leeds, which will have an initial capitalisation of £12 billion to support green innovation. The government is also funding new port infrastructure, to support offshore wind projects.
Two additional schemes to help smaller businesses grow and evolve have been announced. ‘Help to Grow’ will see the government cover 90% of the costs of management training for SMEs, and ‘Help to Grow Digital’ will offer free training and a 50% discount on innovative software to small businesses.
Mr Sunak also announced “radically simplified bureaucracy for high-skilled visa applications”, with quicker processes for entrepreneurs to bring highly skilled workers to the UK.
Finally, the Chancellor announced the creation of 8 new freeports in the UK, that they hope will help to make it easier and cheaper to do business, create jobs and help to regenerate deprived areas.
What are your takeaways from the Budget? How will the new measures affect your business? We’d love to hear your thoughts in the comments below.