Important information for small businesses, sole traders, and employers in the UK following the 2021 Budget
The 2021 Budget has been delivered to Parliament, announcing measures affecting UK businesses. Find out what grants, help and support are available to your business, as well as other key changes.
Budget 2021 for employers
The Chancellor’s statement set out extensions to support available to employers affected by COVID-19. There are also changes to the National Living Wage, and new incentive schemes targeting work-based training.
The Coronavirus Job Retention Scheme (CJRS) scheme was brought in to help employers avoid making staff redundancies as a result of COVID-19. Rather than making cutbacks, employers can instead furlough employees and claim a government grant for the salary costs.
As part of the government’s plan for ongoing economic recovery, the furlough scheme has been extended again – this time until the end of September 2021. The terms of the grant will change in stages.
The current rules will initially continue, with the government grant funding 80% of the hours which eligible employees don’t work. Funding through the grant is capped at a maximum of £2,500 per employee, per month.
As businesses reopen, employers will contribute 10% towards the unworked hours from July 2021.
The Coronavirus Statutory Sick Pay Rebate Scheme has been extended for employers again. It enables employers to reclaim a maximum of two weeks’ worth of SSP which has been paid to staff for sickness absences as a result of COVID-19.
Employer incentives for trainees and apprenticeships
Part of the COVID-19 recovery plan includes incentives for employers to provide work-based training and apprenticeships.
Employers who take on a new apprentice between 1 April 2021 and 31 September will receive £3,000 of funding from the government. Unlike previous versions of the scheme, this is available for apprentices of any age, and not just those aged 24 and under.
Portable flexi-job apprenticeships
Employers will have access to funding from July 2021 which enables them to offer portable apprenticeships. It means that employers will be able to share training and resources, so apprentices can work for different employers within the same sector, expanding their skills and knowledge.
Employer funding for traineeships
In addition to apprenticeship funding, employers can also access grants of £1,000 per trainee in order to provide work placements to those aged 16-24.
The National Living Wage (NLW) is the minimum amount which employers must pay to staff of a certain age. Previously available to those aged 25 and over, from 1st April 2021 this applies to employees aged 23 upwards, and the rate will increase from £8.72 to £8.91 per hour.
The National Minimum Wage for apprentices and other age groups will also change from April 2021.
What the 2021 Budget SEISS extension means for sole traders
The SEISS grant for self-employed workers has also been extended in line with the furlough scheme.
Covering February, March, and April
The government first announced a SEISS grant for this period in November 2020 as part of their Winter Economy Plan. The 2021 Budget announcement sets out the terms of the grant in more detail.
This will be the fourth run of the SEISS grant, and offers 80% of 3 months’ average trading profits paid as a single instalment up to a maximum of £7,500. Anyone who has already submitted their 2019-20 Self Assessment tax return will be eligible. The calculation to work out claims also takes that tax return into consideration.
Covering May to September 2021
The amount you can claim for the fifth SEISS grant depends on how the pandemic has affected turnover for your business in the April 2020 – April 2021 tax year.
Where turnover has reduced by 30% or more, the SEISS grant is equal to 80% of 3 months’ worth of average trading profits, up to a maximum of £7,500.
Where turnover has reduced by less than 30%, the grant is equal to 30% of 3 months’ average trading profits, to a maximum £2,850.
Government guarantees for lenders offering mortgages with a 5% deposit.
Replacing COVID loans with the Recovery Loans Scheme
The government guaranteed Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) were available as part of the wider finance relief package in response to COVID-19.
These are now changing to a new Recovery Loan Scheme, giving eligible businesses access to borrowing of between £25,001 and £10 million. There is also provision for asset and invoice financing between £1,000 and £10 million for businesses of all sizes.
What the 2021 Budget means for the hospitality, retail and leisure industry
Business sectors that are reliant on social contact and free movement have been particularly badly affected by the coronavirus crisis. New measures, and extensions to existing schemes, aim to support hospitality, leisure and retail businesses.
VAT reduction extended again
Initially taking effect from 15th July 2020, the VAT rate for hospitality, accommodation and attractions has been temporarily cut from 20% to 5%.
This was due to return to normal at the end of March 2021, but will now continue throughout the April 2021 – April 2022 tax year:
Hospitality, retail and leisure businesses in England will benefit from a continuing holiday on business rates. The year-long relief plan was due to end at the end of March 2021, but will now continue for English business until 30th June 2021. Further reductions will be available to businesses required to close during lockdown.
The business rates holiday for these sectors in Scotland will continue throughout 2021-2022, with Wales yet to announce plans.
Restart grant to help locked-down businesses reopen
The 2021 Budget includes one-off cash grants for businesses forced to close during lockdown periods. Available in England, the restart grant aims to support businesses as they prepare to re-open, awarding:
Up to £6,000 per premises for non-essential retail businesses.
Up to £18,000 per premises for hospitality and other sectors.
Contactless payment limits increase
To help businesses re-open safely, the contactless payment limit for customers paying by card is increasing from £45 to £100.
Tax rates, reliefs, and allowances
A variety of new and extended tax rates and reliefs have also been confirmed.
Tax relief for businesses suffering losses
Under normal rules businesses can carry back trading losses, and put them against profits in the previous year. This way the business can claim a repayment of the tax already paid in the previous year.
To help businesses that are struggling as a result of COVID-19’s impact, the carry back period was extended from one year to three. Rather than only off-setting trading losses against the previous year, businesses may be able to claim tax repayments from the previous three years.
Income Tax rates and allowances
Whilst neither the rate of Income Tax or National Insurance has changed, the payment thresholds have.
Income tax threshold changes
The personal tax allowance (how much income you can earn in a year before starting to pay tax on it) is increasing from £12,500 to £12,570 from April 2021.
The Higher Rate threshold (the point at which taxpayers start paying 40% income tax) will increase from £50,001 to £50,270.
National Insurance threshold changes
The Primary Threshold (the point at which employees start paying NI) will increase from £9,500 to £9,568.
The Upper Earnings Limit (UEL)/Upper Profits Limit increases from £50,000 to £50,270.
Corporation Tax increase
The increase in Corporation Tax rates won’t actually take effect until 2023, and doesn’t necessarily apply to all limited companies.
Companies who report profits of £50,000 or less will continue to pay Corporation Tax at 19%
The rate will increase in bands, until businesses with a profit greater than £250,000 will pay a maximum of 25% Corporation Tax. More information about the profit bands and which rate of tax they will pay should be available soon.
The temporary super-deduction for capital allowances
The introduction of a new two-year ‘super-deduction’ temporarily increases first-year capital allowances to 130% for purchases of plant and machinery assets which qualify. There’s also a 50% first year allowance for special rate assets which qualify. Read the government guidance on the super-deduction.