Budget 2021 Highlights

Small Business Support

Recovery Loan Scheme

Budget 2021 announced a new loan scheme to be introduced to replace those coming to an end.

From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.

The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

Restart Grants

Restart Grants will be provided in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.

Self-Employment Income Support Scheme (SEISS)

Budget 2021 has confirmed details of a fourth grant. This will be 80% of three months’ average trading profits to be claimed from late April 2021.

Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021.

The scheme has been extended to those who have filed a 2019/20 self assessment tax return prior to 3 March 2021. This means that the newly self-employed from April 2019 now qualify subject to satisfying the other conditions.

A fifth and final grant was announced and can be claimed from late July 2021 to cover the period May to September 2021.

This grant will be determined by a turnover test.

Where the self-employed business turnover has fallen by 30% the grant will be worth 80% of three months’ average trading profits capped at £7,500.

People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.

Business Rates

There will be a continuation of 100% business rates relief for eligible retail, hospitality and leisure properties in England to 30 June 2021.

This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

Nurseries will also qualify for relief in the same way as other eligible properties.

 

Reduced VAT Rate For Hospitality Sector

In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions.

The government has now announced an extension of the reduced rate until 30 September 2021.

To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.

Corporation Tax Rates

The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to 25% for companies with profits over £250,000.

The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less.

Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Super-Deduction

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.

Under this measure a company will be allowed to claim:

  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
  • a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.

This relief is not available for unincorporated businesses.

The Coronavirus Job Retention Scheme – Further Extension (JRS)

In Budget 2021 the Chancellor has further extended the scheme to 30 September 2021.

The level of grant available to employers under the scheme will stay the same until 30 June 2021.

From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees’ wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:

  • for July 2021 70% of furloughed wages up to a maximum of £2187.50 and
  • for August and September 2021 60% of furloughed wages up to a maximum of £1,875.00.

Employers will need to continue to fund employer NICs and mandatory minimum automatic enrolment pension contributions.

Apprenticeships And Traineeships

High Quality Traineeships For Young People

Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Payments For Employers Who Hire New Apprentices

The government will extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire

This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.

Off-Payroll Working In The Private Sector

New tax rules are soon to come into force for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

The legislation uses an existing statutory definition within the Companies Act of a ‘small company’ to exempt small businesses from the new rules. A small company is one which meets two of these criteria:

  • a turnover of £10.2 million or less
  • having £5.1 million on the balance sheet or less
  • having 50 or fewer employees.

If the business receiving the work of the individual is not a company, it is only the turnover test that will apply.

National Living Wage (NLW) And National Minimum Wage (NMW)

The National Living Wage will increase by 2.2% and will be extended to 23 and 24 year olds for the first time.

From 1 April 2021, the new hourly rates of NLW and NMW are:

  • £8.91 for those 23 years old and over
  • £8.36 for 21-22 year olds
  • £6.56 for 18-20 year olds
  • £4.62 for under 18s
  • £4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Enterprise Management Incentives (EMI) Scheme

At Budget 2020, the government announced a review of the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

As part of this review the government is publishing a consultation alongside the Budget.

Van Benefit Charge Nil-Rating For Zero-Emission Vans

From 6 April 2021, a nil rate of tax applies to zero-emission vans within the van benefit charge. In 2020/21 such vans have a van benefit charge at 80% of the standard flat rate of £3,490.

Temporary Changes To Legislation Resulting From Coronavirus

Employer-Reimbursed Coronavirus Tests

The government will legislate in Finance Bill 2021 to introduce a retrospective income tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020/21. Legislation will extend this exemption for the tax year 2021/22.

The corresponding NICs disregard is already in force and this will also be extended for the tax year 2021/22.

Extension Of Income Tax Exemption For COVID-19 Related Home Office Expenses

The government will, by secondary legislation, extend the temporary income tax exemption and Class 1 NICs disregard for employer reimbursed expenses that cover the cost of relevant home office equipment. The extended exemption will have effect until 5 April 2022.

The Personal Allowance

The personal allowance is currently £12,500.

The Chancellor has confirmed that the personal allowance will increase by CPI (0.5%) for 2021/22 to £12,570.

The Chancellor announced that the personal allowance will be frozen at £12,570 for the tax years 2022/23 to 2025/26.

Tax Bands And Rates

The Chancellor announced that for 2021/22 the basic rate band will be £37,700 so that the threshold at which the 40% band applies will be £50,270 for those who are entitled to the full personal allowance.

The Chancellor announced that the basic rate band will be frozen at £37,700 for the tax years 2022/23 to 2025/26.

Individuals pay tax at 45% on their income over £150,000.

Universal Credit

The government is extending the temporary £20 per week increase for a further six months.

Working Tax Credit

The government is making a one-off payment of £500 to eligible Working Tax Credit claimants to provide extra support over the next six months.

Mortgage Guarantee Scheme

The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.

Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest rate for at least five years should they wish to. The scheme will be available for new mortgages up to 31 December 2022.

Green National Savings And Investment (NS&I) Product

The government will offer a green retail savings product through NS&I in the summer of 2021. This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change.

Stay Up-To-Date With Coronavirus News That May Affect Your Business

Coronavirus has affected us all. Whether you’re a sole trader, employer or employee. Stay up to date with the latest news – including government support, tax implications, and more.

Stay Up-To-Date With Coronavirus & Brexit News

Coronavirus has affected us all. Whether you’re a sole trader, employer or employee. Stay up to date with the latest news – including government support, tax implications, and more.