Rishi Sunak, the Chancellor of the Exchequer, has just announced the Budget for 2021. Here's a rundown of what was covered, and what it means for you and your business. It is billed to be the "Budget for Recovery" following Covid19 and follows the government roadmap announced last month. 

The key points 

Sunak has delivered his Budget today at 12:30pm.  
 
This blog gives a brief summary of the key points impacting small business and we will follow-up with further information as the details are released over the coming few weeks.  
 
Bear with us as we read, absorb and interpret the details. 

Furlough Extended 

The Coronavirus Job Retention Scheme (furlough) has been extended to the end of September 2021 to assist businesses through the rest of lockdown and past the summer. Full and flexible furlough will be available. 
 
This will remain at 80% (as it has been) but for July 2021 the employer will be required to make a contribution of 10% and for August and September 2021 the employer will be required to make a contribution of 20%. 
 
We will continue to support our clients with furlough where needed and we believe this is a very welcome measure for many of you to help support your staff with their return to work and normal hours. 

No increase to Income Tax, National Insurance, or VAT and thresholds to remain. 

There will be no increase to Income Tax, National Insurance or VAT and the thresholds will remain the same, but increasing next year to £12,570 and £50,270. This is a measure to assist every individual and protect household incomes. 

Corporation Tax Rates to increase from April 2023 

The Corporation Tax Rate will rise from the current rate of 19% to 25% from April 2023. This sounds like a significant leap - but Rishi has cushioned this by introducing a Small Profits Rate that will keep the Corporation Tax Rate at 19% for businesses with profits up to £50,000. 
 
For businesses with profits between £50,000 - £250,000 the rate will incrementally increase between 19% and 25%. 

Corporation Tax Losses - Carry Back Relief 

Corporation Tax Losses can now be carried back three years (up to £2m) - which will give a helpful cashflow boosts to businesses impacted by Covid19. 

Super-Deduction - for business investment costs 

To encourage businesses to invest and rebuild their businesses, businesses can now offset 130% of cost of investments for the next two years using the "super-deduction". The key here is that it is only on plant and machinery bought new (not second-hand). We are waiting for more details on this. 

Freeze on VAT registration threshold and CGT Annual Exemption 

VAT registration threshold remains as one of the highest in Europe and will be a welcome relief for small businesses and enable them to continue building their businesses without the concerns of VAT until reaching annual turnover of £85,000. 
 
Capital Gains was expected to see some changes - but the Annual Exemption remains frozen - again, good news. 

Loans 

The Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruptions Loan Scheme (CBILS) will both end on 31 March 2021 and a new Recovery Loan Scheme will be available and will have 80% Governement Backed by guarantee enabling businesses to access loan funds of £25k to £10m through to the end of the 2021. 

VAT in Hospitality 

The 5% VAT rate for hospitality will be extended and remain in place until 30 September and then an interim rate of 12.5% will be in place for a further 6 months. 

Self-Employed Income Support Scheme 

The SEISS will be extended to give a 4th grant for February - April 2021 and 5th grant for May 2021 onwards. 
 
Those whose turnover has reduced by 30% or more will receive 80%, others will receive 30%. 
 
Newly self-employed (who have submitted a Tax Return for 2019/20) are now eligible. 

Business Rates 

The business rates holiday implemented for 2020/21 will be extended giving 100% business rates holiday for April – June 2021 and – for the last 9 months of the year there will be a discount of 2/3 up to value of £2m with a lower cap for those that have been able to stay open. 

Stamp Duty Reduction 

The Stamp Duty reduction will now remain in place until 30 June (was originally 31 March) and there will then be a 0% rate bank threshold of £250k up to 30 September. 

What now? 

These are the key highlights impacting our clients, but more details will follow in the coming days and weeks.  
 
Now that the Budget has been confirmed, we will be sending out Salary and Dividend recommendations for 2021/22 to all of our clients - so please keep an eye on your inbox for this. 
 
If you're concerned about anything you've seen in the Budget, please get in touch with us. 
 
 
 
 
Written by 
 
Nicola J Sorrell - 
Effective Accounting 
 
Founder | Xero Champion | IR35 Expert 
Tagged as: Budget & Tax Rates
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