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UK Spring Budget 2021: what it means for small businesses

6-minute read

Sam Bromley

3 March 2021

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The Chancellor, Rishi Sunak, has announced further support for the struggling high street, including a business rates holiday extension and a new ‘restart’ grant scheme.

Rishi Sunak used the UK Spring Budget to outline his ‘three part plan’ towards economic recovery – supporting those still struggling through coronavirus, paying for the response, and investing in the future economy.

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The business rates holiday has been extended

The Institute of Chartered Accountants in England and Wales (ICAEW) recently found that just one in four of its members said their clients in retail, hospitality and leisure would be able to pay business rates in full at the end of March.

The Chancellor has avoided this ‘cliff-edge’ by announcing another business rates holiday until the end of June. After that, business rates will be discounted.

In Scotland, a business rates holiday for retail, hospitality, leisure, and aviation businesses in 2021-22 had already been announced. Wales has also confirmed a business rates holiday for the full 12 months for retail, hospitality and leisure businesses.

The VAT cut to five per cent for hospitality and tourism businesses will also remain until September. After that, it’ll increase to 12.5 per cent, before returning to 20 per cent in April 2022.

There’ll also be a freeze in duty rates for beer, cider, wine and spirits.

John Boulton, the ICAEW’s Technical Policy Director, wants the government to rethink the business rates system altogether: “As we consider the end of this lockdown, the time is right for a fundamental rethink of business rates, to build a system fit for the high street of the future.”

The previously announced business rates review will now be published in the autumn. The review looked for views “on key issues including reforming the rates multiplier and looking at alternative ways of taxing non-residential property”.

‘Restart’ grants to help the high street reopen

The government has announced a £5 billion grant scheme for England to help high street businesses reopen after lockdown.

Around 700,000 businesses will be eligible for the grant, including shops, salons, gyms, and restaurants.

As non-essential retail opens earlier, grants to those businesses will be worth up to £6,000.

With hospitality opening later, individual businesses could receive as much as £18,000.

The government has introduced various grant schemes while restrictions have been ongoing. The headline Local Restrictions Support Grant was initially designed to support businesses suffering reduced demand or forced to close under the ‘tier’ system, but was subsequently updated to cover national restrictions too.

The BBC says that the new ‘restart’ grant will be paid to businesses directly by your local authority from April and that it replaces the currently monthly grant.

This grant is England-only. Devolved administrations will receive funding both inside and outside of the Barnett formula.

Furlough has been extended until the end of September

The Coronavirus Job Retention Scheme (CJRS), or furlough, was the Chancellor’s headline scheme announced before the start of lockdown in March 2020.

Initially designed as a short-term measure to protect jobs and livelihoods, the government has announced that it’ll now run until 30 September 2021.

If you employ people that you’ve furloughed, note that the support will be tapered – you’ll need to contribute 10 per cent towards hours staff don’t work in July, increasing to 20 per cent in August and September.

Simply Business’s UK CEO, Alan Thomas, said: “We welcome the decision to extend the furlough scheme through to the end of September. With small businesses accounting for 48 per cent of all UK jobs, this is an essential lifeline for millions up and down the country, and is another show of support to the SMEs who will be key to our collective recovery.”

Wider eligibility for Self-employment Income Support Scheme

The Self-employment Income Support Scheme (SEISS) has been extended for a fifth grant, covering June, July and August. But the fifth grant will be more targeted:

  • those whose turnover has fallen more than 30 per cent will still eligible for 80 per cent of average monthly profits (up to £7,500)
  • those who haven’t been as affected will be eligible for a grant worth 30 per cent of average monthly profits

Eligibility for the fourth and fifth grants is wider – if you submitted a 2019-20 tax return by midnight last night, you’re eligible. This means people who were newly self-employed can now apply for the grants.

But while eligibility for SEISS has been widened, there’s still no support for the estimated three million self-employed people forgotten by the government response so far.

These include freelancers, limited company directors, and the self-employed with more than £50,000 in trading profits. Read about the UK Budget 2021 for contractors and the self employed.

Our UK CEO, Alan Thomas, said: "While today’s announcement will provide millions of SMEs with the needed certainty to confidently plan for the future, it’s essential to recognise that many will still be left without the support that they need. We’d urge the Chancellor to do all he can to support the UK’s diverse range of small businesses as we look to bounce back from the effects of the pandemic.”

Community fund to buy out pubs

Pubs and hospitality venues have been hit hard by the pandemic. If you own a venue that’s at risk of shutting down, or are interested in saving a venue close to your heart, the government has announced a £150 million pot to help your local community save it from closure.

It’s a four-year UK-wide scheme that lets communities bid up to £250,000 to save a nearby pub or social club. The government will match the money raised.

The Campaign for Real Ale (CAMRA) said that policies also need to be in place so that pubs will be protected from property developers: “This would also give communities an opportunity and the time they need to use the new Community Ownership Fund to bid to take over the running of their local pub or social club if it is threatened with closure, change of use, or demolition.”

A Corporation Tax increase – but not until 2023

The Chancellor has announced an increase in Corporation Tax as one step towards paying for the government’s response to coronavirus.

The rate of Corporation Tax paid on company profits will increase to 25 per cent – but with some crucial protections:

  • the new rate won’t be introduced until April 2023
  • small businesses with profits of £50,000 or less will continue to pay the current 19 per cent rate
  • the rate will then be tapered up, depending on business profits – only business with profits of more than £250,000 will pay 25 per cent

The Chancellor says that this means only 10 per cent of all companies will pay the 25 per cent rate.

Management training announced to boost productivity

It’s important that small businesses stay on top of the products and services customers want.

But strategic skills are important – so government-backed ‘executive development’ training could help you boost growth.

The Chancellor announced the scheme in the Budget as part of the government’s ‘help to grow’ plan, designed to boost productivity, efficiency, and digital skills.

UK businesses can access a 12-week online management programme from June, with 30,000 places available over three years. The government covers most of the cost – you’ll be charged £750. You need to have between five and 249 employees and have been operating for more than a year.

In the autumn you can also apply for discounts on productivity software to aid digital growth and presence.

The government says the help to grow plan is open to 130,000 small businesses.

You can find more details on gov.uk.

Freeze in the personal allowance threshold

‘Stealth taxes’ were rumoured before the Budget announcement. Stealth taxes don’t involve headline increases or changes – instead, the government will freeze rises in thresholds.

While the Chancellor committed to a planned rise in income tax thresholds next year, from then, they'll be frozen:

  • basic rate threshold increases to £12,570 next year
  • higher rate threshold increases to £50,270 next year
  • they’ll stay at that level until 2026 – the government claims “nobody’s take home pay will be less than it is now”

A roundup of other Spring Budget 2021 announcements for small businesses

  • a new ‘super’ tax deduction for companies investing in plant and machinery, which will cut companies’ tax bill by 25p for every pound they invest in new equipment – taxable profits can be reduced by 130 per cent of the cost
  • fuel duty will be frozen
  • a new mortgage guarantee scheme, which lets homebuyers secure a mortgage with a low five per cent deposit
  • the current stamp duty holiday will be extended until June, and tapered down until September

Simply Business’s UK CEO, Alan Thomas, said about the Budget: “At Simply Business, we welcome the lifeline for small businesses in today’s budget. It’s positive news to see small businesses rightfully recognised in the nation’s economic recovery plan, but know that many self-employed people will be left without the support they need to survive, let alone thrive.

“By providing this latest package of SME support measures which total £33 billion, including the extension of the Self-employment Income Support Scheme and Business Rates Relief, Mr. Sunak will enable many small businesses to make it beyond the current lockdown restrictions. These measures have primed the UK economy for a positive, if phased, reopening as we move through this year.”

What do you think about the announcements in the UK Spring Budget 2021? Let us know in the comments below.

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