Over the past couple of days you may have seen a lot of news about the Budget announced by the UK Government – more in specific Rishi Sunak who is Chancellor of the Exchequer. The role of the Chancellor is to be in charge of all economic and financial matters on behalf of the Government. In many countries this role is usually referred to as the Finance Minister.
What is the Budget?
The Budget or ‘The Budget of Her Majesty’s Government’ is the annual budget set by the Government to explain plans for Government spending and revenue generation (taxes) for the upcoming year.
What does the Budget look like for 2021 and what does it mean for my business?
If you are interested in reading the Budget in full you can check out all 107 pages here. You can also watch Rishi Sunak give his budget speech to parliament where he summarises the major points here.
Alternatively, if you are in need of a quick breakdown of the parts most relevant to business we’ve put together a summary below.
Self-employment Income Support Scheme
Some good news for the Self Employed. The Self Employment Income Support Scheme (SEISS) has been extended to September 2021. The grant now covers 2019-20 tax returns making an extra 600,000 eligible for support.
Applications for Grant 4 open in late April & close 31st May and covers February, March and April. It covers 80% of average trading profits up to £50,000, capped at £7,500.
Grant 5 covers May, June, July, August and September and will open for applications in late July. People whose turnover has fallen by 30% or more can access the full grant worth 80% of three months’ average trading profits up to £50,000 and capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.
More details about SEISS grants here.
Support for Employers, Employees, Visas & Training
Coronavirus Job Retention Scheme (Furlough)
The furlough scheme has been extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked. Employers need to pay National Insurance contributions (NICs) and pensions in April, May and June. However there will be a change from July as the government will require employers to contribute towards the cost of unworked hours of 10% in July, 20% in August and 20% in September.
Help to Grow training scheme
To support the growth of businesses, the Government will be working alongside Business Schools to launch a new management programme supporting 30,000 SMEs over 3 years. The 12 week programme will be 90% subsidised by the government.
Help to Grow Software Vouchers
Another national support scheme will be launched to help 100,000 SMEs to use software to improve productivity. It will offer a voucher covering up to half of the costs of approved software up to a maximum of £5,000, and free impartial advice, delivered through an online platform.
The Government is keen to encourage more businesses to explore apprenticeships. To do this it will extend and double the payments made to employers in England who hire new apprentices. This will be £3,000 per new hire for apprentices between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 under the previous scheme.
Statutory Sick Pay (SSP) Rebate Scheme
Employers with less than 250 employees across the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee.
Visas for people from overseas
A new ‘scaleup visa’ will enable those with a job offer from a recognised UK scale-up to qualify for a fast-track visa. The government will also review the ‘innovator visa’ to make it easier for entrepreneurs to obtain a visa to come to the UK.
Changes to the Global Talent visa have also been mentioned as well as increased support for those using a visa scheme for the first time, an expansion to the Global Entrepreneurship Programme & a new Global Business Mobility visa to help international businesses establishing or relocating to the UK.
Grants for retail, leisure and hospitality
Businesses in England can access £5bn of new “restart grants”.
Non essential retailers can access a grant of up to £6,000 per premises and hospitality, accommodation, leisure, personal care and gym businesses can get up to £18,000. An additional £425m of discretionary business grant funding will be provided to local authorities to distribute.
Culture Recovery Fund
The government will provide £300 million to extend the Culture Recovery Fund to continue to support key national and local cultural organisations in England as the sector recovers.
Recovery Loan Scheme
Once other loan schemes such as Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme close at the end of March 2021, a new Recovery Loan Scheme will be introduced. From 6 April until 31 December 2021, businesses will be able to apply for loans and overdrafts between £25,001 and £10m and invoice finance and asset finance between £1,000 and £10m. The government will provide an 80% guarantee to lenders.Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. No personal guarantees will be taken on facilities up to £250,000.
Taxes & Rate Changes
VAT reduction for tourism and hospitality
The temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector will be extended until 30 September 2021. A 12.5% rate will then apply for six months until 31 March 2022.
Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief until 30 June 2021. This will be followed by 66% business rates relief from 1 July 2021 to 31 March 2022, capped at £2m per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
Eight new English freeports, which provide businesses with tax reliefs, simplified customs procedures and wider government support, will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. They will operate from late 2021. Find out what a Freeport is here.
In 2023, the main rate of corporation tax will increase to 25%. A new small profits rate will keep the tax at 19% for businesses with profits of £50,000 or less and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate. It is estimated that only 10% of businesses will have to pay the full 25% rate. Even this higher rate remains highly competitive compared with other countries around the world.
Extended loss carry back for businesses
To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses:
• Unincorporated businesses and companies that are not members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22
• Companies that are members of a corporate group will be able to obtain relief for up to
£200,000 of losses in each of 2020-21 and 2021-22 without any group limitations
• Companies that are members of a corporate group will be able to obtain relief for up to
£2 million of losses in each of 2020-21 and 2021-22, but subject to a £2 million cap across the group as a whole
‘Super-deduction’ tax incentive
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets 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
It will allow companies to cut their tax bill by up to 25p for every £1 they invest.
More details of the scheme can be found here.
Social Investment Tax Relief (SITR) extension
The government will continue to support social enterprises in the UK that are seeking growth investment by extending the operation of SITR to April 2023. This will continue availability of Income Tax relief and Capital Gains Tax hold-over relief for investors in qualifying social enterprises, helping them access patient capital.
Birmingham Enterprise Community was proud to have signed a letter with fellow social enterprise organisations to Rishi Sunak pleading for this extension to SITR. We are grateful for the Chancellor for listening to the sector & extending this scheme that allows millions of pounds of investment into social enterprises.
R&D Tax Credit Reforms
The Budget announced plans for reforms of the R&D Tax Credit system. These reforms are to make sure the scheme is still fit for purpose in incentivising businesses to invest into research and development activities as well as providing a world-class attractive location for business. Furthermore, concerns have been raised regarding abuses of the R&D tax scheme and these reforms are likely to take action against misuse of the system.
To further support the hospitality industry and its suppliers, the duty rates
on beer, cider, wine and spirits will be frozen for another year.
The government will freeze fuel duty in 2021-22. This is the eleventh
consecutive year of the freeze.
UK Infrastructure Bank
Establishment of a new UK Infrastructure Bank, which will fund major projects and help deal with climate change, will be based in Leeds. It will have an initial capitalisation of £12bn. Read more here.
UK Community Renewal Fund
Launch of a £220m fund which is focused on investing in skills, community, local business, and supporting people into employment as the UK moves away from using EU funding. Read more here.
Levelling Up Fund
The Budget announced the publication of the prospectus for the £4.8bn Levelling Up Fund which provides guidance for local areas on how to submit bids for the first round of funding. Read more here
Community Ownership Fund
New £150m fund to allow communities to buy pubs, theatres, shops, or local sports clubs to prevent them from closing. Read more here.
Future Fund: Breakthrough
In replacement of last year’s co-investment Future Fund, a new £375m direct co-investment scheme will be launched by the government to support innovative, R&D-intensive businesses. The British Business Bank will take equity in funding rounds of over £20m led by private investors.
Green Bonds Scheme
The government will issue its first sovereign green bond – or green gilt – this summer, with a further issuance to follow later in 2021 as the UK looks to build out a ‘green curve’.The green gilt framework, to be published in June, will detail the types of expenditures that will be financed to help meet the government’s green objectives. The government also commits to reporting the contributions of green gilt spending towards social benefits such as job creation and levelling up.
With everything else included, this year’s budget is one of the biggest levels of Government spending in UK history as the country looks to rebuild its economy post-COVID. There may still be some gaps in support that businesses need but the Budget does provide much needed funding & incentives to support businesses here in the UK to bounce back & grow moving forward.
Birmingham Enterprise Community strives to keep its members & supported businesses up to date with the latest developments & available support. If you have any questions about any of the above please contact the team at firstname.lastname@example.org