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Autumn Budget 2021: what was announced for small businesses?

5-minute read

Catriona Smith

27 October 2021

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The Chancellor Rishi Sunak has announced a shake-up of alcohol duty as well as a cut to business rates to support the high street.

He used the Autumn Budget and Spending Review on 27 October to outline plans for growth and how the government will help with the cost of living to ‘build a stronger economy for the British people.’

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Boost for high street with 50% cut to business rates

In a bid to retain businesses and ‘create stronger high streets’, the chancellor has announced a 50 per cent discount on business rates for retail, hospitality, and leisure businesses in England.

For the next financial year, businesses will be able to claim a 50 per cent reduction in 2022-23, up to a maximum of £110,000.

And from 2023, a new business rates relief will support investment in property improvements so that no business will face higher business rates bills for 12 months after making ‘qualifying improvements’ to their property. This speaks to the government’s drive to meet net zero targets and hopes to encourage businesses to adopt green technology, such as solar panels.

Wider reforms could be possible in the future as the government is said to be exploring a UK-wide online sales tax. It’s hoped that revenue from a new online sales tax could reduce business rates.

Business rates are devolved, so the devolved administrations will get additional funding through the Barnett formula.

Simplifying and reducing alcohol duties

The chancellor said he’s simplifying alcohol duty based around the principle of ‘the stronger the drink, the higher the rate'.

The main duty rates will be cut from 15 to six. There’s also going to be a new relief for smaller producers of alcohol, including cider and sparkling wine, that builds on the existing small brewers relief.

Pub owners will also welcome a new relief which sees a cut to duty rates on draught beer and cider by five per cent, taking 3p off a pint. However this new lower rate won’t come in until 2023.

Sunak says it’s the ‘biggest cut to cider duty since 1923 and the biggest cut to beer duty for 50 years.’ And he hopes this will ‘benefit community pubs, who do 75 per cent of their trade on draught’.

What’s more, the planned increase in duty on spirits like whiskey and wine will be cancelled from midnight tonight.

UKHospitality's Chief Executive, Kate Nicholls, today said: “Positive as these announcements are, hospitality remains incredibly fragile, facing myriad critical issues.

“Rising utility bills, wage bills and food and drink prices have resulted in 13% inflationary costs that businesses are having to absorb at the same time as they navigate severe supply chain issues and chronic staff shortages.”

Fuel duty rise cancelled

If you drive for your business, you’ll be pleased to hear that a fuel duty rise has been frozen for another year.

Fuel duty is to remain frozen at 57.95 pence per litre UK-wide for 2022-23. In his speech, Sunak says this means after 12 consecutive years of frozen rates, the average car driver will save £1,900 over the next five years (compared to the pre-2010 escalator).

Recovery loan to be extended for six months

There’s going to be a six-month extension to the Recovery Loan Scheme until 30 June 2022.

Businesses can apply for a loan of up to £2 million. Any loans will be 70 per cent backed by the government (reduced from 80 per cent originally).

According to the British Business Bank, only 5,137 UK businesses have made use of the scheme so far, however it’s hoped that this extension will give more businesses opportunity to bounce back after the pandemic.

The scheme was set to end on 31 December, but the Treasury said at the time that this was ‘subject to review’.

Minimum wage increase

Those on the national living wage and national minimum wage will see a salary increase with new rates announced today.

From 1 April 2022, the new national living wage rate will rise from £8.91 an hour to £9.50 for workers over 23 years old.

The rate for the national minimum wage will also go up. People aged 21-22 will see an increase from £8.36 to £9.18, and apprentices (aged 16 and over and not in full-time education) will get £4.81 an hour, up from £4.30.

ITV’s Robert Peston said the increase “will go some way to compensating the low paid for recent significant rises in the price of energy and food, at a time when the £1,000 a year top-up to Universal Credit has been controversially removed.”

A wage increase will be welcome news, but also adds to the rising costs to businesses struggling to bounce back after the pandemic. According to a BBC News report, one pub chain says the price of a pint could increase by 30p.

In the same report, Emma McClarkin, chief executive of the British Beer & Pub Association, said that while increases to the minimum wage and the minimum living rate would be "welcomed" by many staff in pubs, it was a further cost increase for pubs who were "still struggling to recover and face an uncertain future".

Angel investor scheme outside London

The British Business Bank has launched a Regional Angels Programme, which is an angel investor scheme that aims to “help reduce regional imbalances in access to early stage equity finance for smaller businesses across the UK”.

The government is giving the programme £150 million at this Budget. Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “The funding will help ensure some of our most promising young companies across the UK get access to the finance they need to support their growth journey.

“Ministers must continue to ensure that the programme has sufficient funding capacity to meet any future surge in demand.”

Read more about finding angel investors for your business.

Some changes we already knew about, including:

The National Insurance increase

Arguably one of the biggest financial announcements, a hike to National Insurance had already been announced last month.

The rate will increase by 1.25 per cent in April 2022 as a way for the government to pay for health and social care across the country.

Find out more about National Insurance and what you need to pay if you’re self-employed.

VAT rise to 20% is going ahead

Despite calls from businesses to keep the lower rates, VAT rates will return to pre-pandemic levels as planned in April 2022.

The rate will increase to 20 per cent, after being slashed to five per cent and then 12.5 per cent to support businesses during the pandemic.

This will be a blow to the hospitality and tourism industry as UKHospitality’s #VATsEnough campaign had been urging the Chancellor to keep the permanent low rate of VAT.

A roundup of other Autumn Budget 2021 announcements for small businesses

  • 50 per cent discount on business rates for retail, hospitality and leisure (in England)
  • simplification and reduction of alcohol duty
  • fuel duty freeze for 12th consecutive year
  • Recovery Loan Scheme extended until 30 June 2022
  • national living wage will increase to £9.50 an hour from 1 April 2022
  • angel investor scheme outside London

Simply Business’s UK CEO, Alan Thomas, said about the Autumn Budget: "The Budget has come at a crucial time for small businesses as they look to continue their recovery from the ongoing impact of the pandemic.

"While today’s business rates announcements will support many in their attempts to rebuild after Covid-19, it’s vital that we recognise the contributions of small businesses across the board. It’s never been more important to support the self-employed, and we encourage the government to do all they can to aid their revival in the coming months and years.""

See the full report on the Impact of Covid-19 on UK Small Businesses.

Work in the trades? Read our summary of what the Autumn Budget means for tradespeople. Or find out what was announced in the Budget for contractors and freelancers.

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

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