The much-awaited budget announcement by Chancellor Rishi Sunak to help the economy recover will have had businesses across Lancashire tuning in, to see just how they will be helped to bounce back and recover from the impact of the pandemic.
There was some good news for business with the extension of the furlough scheme until September 2021, corporation tax for small business with £50,000 or less staying at 19 per cent, and the announcement of the fourth grant for self-employed to cover 80% of profits from February to April 2021 – and open to those who may not have previously been able to claim the grant.
What is it?
Employees can be paid up to £2,500 while being furloughed by their employer – for hours they cannot work. Employers pay employers national insurance and employers’ pension contributions.
What is changing
Employees will continue to receive 80% of their wages until the end of September 2021 for furloughed hours and employers will need to start contributing (in addition to the usual employers NI and pension contributions) as follows:
March-June 2021: HMRC pays 80% of employees wages
July 2021: Employers pay 10%, HMRC pays 70%
August 2021: Employers pay 20%, HMRC pays 60%
September 2021: Employers pay 20%, HMRC pays 60%
What is it?
The Self-employment Income Support Scheme (SEISS) is a Government scheme to help self-employed who have been impacted by the pandemic.
There have been three grants so far available, which self-employed people do not have to pay back, because it is a grant and not a loan – although Income Tax and National Insurance on it will have to be paid.
What has changed?
The Chancellor announced a fourth and fifth grant, and this time an estimated 600,000 more self-employed people will be eligible for help.
They will take into account 2019 to 2020 tax returns – and crucially, also open to those who became self-employed in 2019-2020 tax year, who may not have been eligible previously.
The fourth grant will cover the period of February to April 2021 and will pay 80 per cent of average trading profits, up to a maximum of £2,500 a month.
It will be open to be claimed by late April and to qualify, a self assessment tax return for 2019-2020 must have been submitted by March 2 and trading profits must be no more than £50,000 to qualify.
To claim you must have experienced a significant financial impact from Corona Virus between February 2021 and April 2021.
Claims for the fourth SEISS grant must be made by May 31, 2021.
The fifth grant will be made available to cover the period from May to July and is expected to be pen for applications in the summer.
What is it?
Corporation tax is paid by businesses in the UK and is calculated on their annual profits.
What has changed?
The Chancellor announced there will be an increase in Corporation Tax, but the new rate of tax paid on company profits of 25 per cent won’t come into effect until April 2023. Although, only businesses with profits of more than £250,000 will pay the higher 25 per cent.
Businesses with profits of £50,000 or less will continue to pay the current rate of 19 per cent.
If you’re a VAT registered business, you can temporarily reduce the rate of VAT on supplies relating to hospitality, accommodation, or admission to certain attractions.
What are the changes?
▪️As announced at budget 2021, the government are;
• Extending the temporary reduced rate of VAT of 5% until 30 September 2021.
• Introducing a new rate of 12.5% from 1 October 2021 to 31 March 2022.
▪️The supplies to which the temporary reduced rates will apply remain the same.
For more detailed guidance, take a look at HMRC’s website using this link;
Recovery Loan Scheme
A new Recovery Loan Scheme to support businesses recover has been announced, as the previous Bounce Back Loan Scheme comes to an end.
The new scheme will enable businesses continue to access loans and finance between £25,000 to £10 million, with the Government giving lenders an 80 per cent guarantee. The scheme will run from April until the end of the year.
Businesses are eligible if they have been impacted by COVID-19.
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Here is a brief overview of all the other main takeaways from the Budget 2021
• Furlough Scheme Extended until the end of September
• Government to continue paying 80% of employees’ wages for hours they cannot work
• Employers to be asked to contribute 10% in July and 20% in August and September
• Support for the self-employed also to be extended until September
• 600,000 more self-employed people will be eligible for help as access to grants is widened
• £20 uplift in Universal Credit worth £1,000 a year to be extended for another six months
• Working Tax Credit claimants will get £500 one-off payment
• Minimum wage to increase to £8.91 an hour from April
Economy & Public Finances
• UK economy shrank by 10% in 2020
• Economy forecast to rebound in 2021, with projected annual growth of 4% this year
• Economy forecast to return to pre-Covid levels by middle of 2022, with growth of 7.3% next year
• 700,000 people have lost their jobs since pandemic began
• Unemployment expected to peak at 6.5% next year, lower than 11.9% previously predicted
• UK to borrow a peacetime record of £355bn this year.
• Borrowing to total £234bn in 2021-22
• No changes to rates of income tax, national insurance or VAT
• Personal income tax allowance to be frozen at £12,570 from April 2022 to 2026
• Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026
• Corporation tax on company profits to rise from 19% to 25% in April 2023
• Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000
• Stamp duty holiday on house purchases in England and Northern Ireland extended to June, with no tax liability on sales of less than £500,000
• No changes to inheritance tax or lifetime pension allowance or capital gains tax allowances
Health & Education
• £1.65bn to support the UK’s vaccination rollout
• £19m for domestic violence programmes, funding network of respite rooms for homeless women
• £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee
• £10m to support armed forces veterans with mental health needs
The Arts & Sport
• £400m to help arts venues in England, including museums and galleries, to re-open
• £300m recovery package for professional sport and £25m for grassroots football
Business, digital and science
• Tax breaks for firms to “unlock” £20bn worth of business investment
• Firms will be able “deduct” investment costs from tax bills, reducing taxable profits by 130%
• Incentive grants for apprenticeships to rise to £3,000 and £126m for traineeships
• VAT rate for hospitality firms to be maintained at reduced 5% rate until September
• Interim 12.5% rate to apply for the following six months
• Business rates holiday for firms in England to continue until June with 75% discount after that
• £5bn in Restart grants for shops and other businesses forced to close
• £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses
• New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas
• Contactless payment limit will rise to £100 later this year
Alcohol, Tobacco & Fuel
• All alcohol duties to be frozen for second year running
• No extra duties on spirits, wine, cider or beer
• Fuel duty to be frozen for eleventh consecutive year
Environment, Transport, Infrastructure & Housing
• New UK Infrastructure Bank to be set up in Leeds
• It will have £12bn in capital, with aim of funding £40bn worth of public and private projects
• £15bn in green bonds, including for retail investors, to help finance the transition to net zero by 2050
Nations & Regions
• £1.2bn in funding for the Scottish government, £740m for the Welsh government and £410m for the Northern Ireland executive
• 750 UK civil servants to be relocated to new Treasury campus in Darlington
• £1bn Towns Fund to promote regeneration in 45 English towns
• £150m for community groups to take over pubs at risk of closure
• First eight sites for freeports in England announced