Budget 2021 – super summary for business owners, entrepreneurs and sole traders
So, here follows my take on the budget for those that we work with most closely, namely owner managed businesses and entrepreneurial individuals…
I’ll attach a link to the official summary, and the below is my take only… Andy would remind me to caveat that this is my personal understanding with the information we know right now (and remember the full details aren’t all out yet), and therefore does not constitute advice!
Budget 2021 Headlines for business:
So, here are the big headlines from Rishi’s announcement today, the good, the bad and the darn right ugly:
Protecting jobs and livelihoods:
- Furlough scheme (CJRS)
- As anticipated the furlough scheme has been extended beyond the point at which the economy is set to open up again in June 2021, to end of September 2021
- From July employers will be expected to contribute to the furlough scheme, paying 10% that month, and 20% in August and September, much as they did in the summer months of 2020
- Self Employed Income Support Scheme (SEISS)
- Good news for many here, as not only has a ’round 5’ of SEISS been confirmed, but also the fact that many newly self employed will now be able to access the scheme, with it being opened to include the 2019-20 tax year.
- Round four will be open to all and further details will be published in due course
- Round 5 will be the final grant and will cover the May-September 2021 period. In order to access the full grant, again capped at £7,500 individuals will need to show that their profits have fallen by 30% or more. For those whose profits have fallen by less than 30%, their grant will be capped at 30% of the maximum, or £2,850
- Stamp Duty Land Tax (SDLT)
- As anticipated the SDLT holiday on properties up to the value of £500,000 has been extended until the end of June, in an effort to keep the property market moving.
- Remember this doesn’t apply to any additional rate SDLT on second properties
- Mortgage Guarantee Scheme (MGS)
- A new MGS has been introduced to help first time buyers in particular get on the property ladder with mortgages on properties of up to £600,000 for only a 5% deposit and fixed for up to five years
- Restart Grants for badly hit sectors, such as leisure, hospitality, tourism, personal care and gyms
- with one off cash grants of up to £18,000 per business premises in these sectors to help them get up and running profitably again
- for businesses in the non essential retail sector, there will be grants of up to £6,000 premises
- Recovery Loan Scheme
- The government will provide lender with an 80% guarantee on eligible loans as well as asset and invoice finance schemes between £25,000 and £10 million.
- This will be open to all businesses, including those who have already had CBILS and BBLS
- Six-month extension of the £20 per week Universal Credit uplift
- VAT reduction to 5% for hospitality and tourism extended until end September, followed by an interim increase to 12.5% until end of March 2022
- Extension in business rates relief
- Eligible retail, leisure and hospitality businesses will receive 100% rates relief from 1 April to 30 June, then 66% from 1 July to 31 March 2022
- Nurseries will also qualify for relief
- SSP reclaims for SMEs extended
- further details on this extension to be released
- Company loss carry back rules extended to three years
- For both sole trades and incorporated businesses
- Up to £2million of losses in each of 2020-21 and 2021-22 for businesses and companies which are not members of a corporate group
Strengthening the public finances
- The increases to basic and higher tax rate bands from 5 April 2021 will be frozen until 2026, pushing may more people into tax paying bands at both rates over the period
- Estimated that 1.5 million more people will be paying basic rate tax, and 1 million more higher rate tax by 2026
- Corporation tax (CT) – the biggie – corporation tax will remain 19% until 2023 when profits greater than £250,000 will be taxed at 25%.
- From April 2023 companies with profits less than £50,000 will still see CT at 19%, and there will be reliefs, or tapering of tax on profits between £50-£250k
- Inheritance and Capital Gains Tax and the Residence nil rate band, as well as the Pensions Lifetime allowance, like income tax bands, are frozen until 2026.
- After all the talk and consultations pre budget this feels like a win, although in reality it is really just another stealth tax…
- Likewise, the VAT registration and deregistration thresholds remain unchanged until at least 31 March 2023
- Fuel duty will be frozen in 2021-22, as will alcohol duty (and I must say, after the year we’ve had, I know they are receiving more in terms of alcohol duty from our household than in previous years, even as our fuel consumption has decreased dramatically)
There are other measures which I’ve not mentioned as you can read about them in the full budget details which I’ve sent out here:
But we still should draw attention to the fact that HMRC are changing the way they penalise businesses for late filing of self assessment tax returns and VAT returns as well as for late payment of tax to a points based system.
For VAT tax payers reforms will come into effect for periods starting on or after 1 April 2022 – more on this later…
As always, if you have any questions or concerns about how the busdget announcements will affect you or your business, please feel free to contact any of the IN Team either directly or via the website here.
If you would like to read the Governments 106 page budget report, you can do so here: