Budget 2021: What It Means for Small Businesses

With the economic challenges brought on by the Covid-19 pandemic front of mind for many, this year's Budget has been much anticipated. Chancellor Rishi Sunak was tasked with kickstarting economic recovery and protecting jobs while also recognising the need to begin repairing the public finances.

As expected, this led to a number of key announcements, support packages and tax changes, many of which will affect small businesses. This includes:

Furlough scheme extended

The Coronavirus Job Retention Scheme has been extended to September. Employees will continue to receive 80% of their wages under the scheme, however from July employers will be expected to contribute 10%, increasing to 20% in August and September. This is in addition to continuing to pay national insurance and pension contributions.

Self-Employment Income Support Scheme (SEISS) extended.

Government support for self-employed workers will also be extended to September. A fourth grant, set at 80% of three months' average trading profits, will be available from late April until 31st of May. It will be paid out in a single installment and capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed more recently, potentially opening it up to 600,000 more self-employed workers. 

A fifth grant is set to cover the period from May to September, but here the criteria changes. Those people whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months' average trading profits, again capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. 

If you are eligible, HMRC will contact you in mid-April to give you your claim date. 

Help to Grow scheme

One of the more interesting initiatives for small businesses, the Help to Grow scheme, designed to help small businesses boost their productivity. It has two arms; Help to Grow Management and Help to Grow Digital.

Help to Grow Management is a 12-week programme delivered by leading business schools across the UK that will combine a practical curriculum with 1:1 support from a business mentor, peer-learning sessions and an alumni network. It aims to support small business leaders develop their strategic skills with key modules covering financial management, innovation and digital adoption. Some 30,000 places will be available over three years starting in June. The programme is 90% subsidised by the government – participants will be charged £750. It is open to any UK business from any sector operating for more than a year and has 5-249 employees.

Help to Grow Digital is a new online platform for small businesses to access free, impartial advice on how technology can boost their performance.

Eligible businesses will also be able to get a discount of up to 50% on the costs of approved software, worth up to £5,000. The voucher is expected to be available to UK businesses that have between 5 and 249 employees and are registered at Companies House if they have been trading for more than 12 months and are purchasing the discounted software for the first time.

You can register your interest for both schemes as https://helptogrow.campaign.gov.uk.

Business rates holiday

The business rates holiday in England has been extended by an additional three months until the end of June. This means 750,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1 April when combined with Small Business Rates Relief.  

Hospitality and tourism VAT cut extended 

The VAT cut to 5% for hospitality and tourism businesses will continue until September. After that, it'll increase to 12.5% before returning to 20% in April 2022.

Restart Grant

The Chancellor also announced that a Restart Grant would be provided in April to help businesses reopen as we move out of lockdown. Non-essential retailers will be first to benefit from the cash, receiving grants of up to £6,000 per premises. Other high street businesses, such as hospitality and leisure, personal care and gyms, will be given grants of up to £18,000 per premises as they're due to reopen later. Around 700,000 businesses will be eligible for the grant, which will be paid to companies directly by local authorities from April, replacing the currently monthly grant.

Recovery Loan

Businesses of any size can also apply for the new Recovery Loan, which replaces previous Covid-19 loan packages. Available until the end of the year, these loans range from £25,000 up to £10 million, with the UK government providing lenders with an 80% guarantee. Term loans and overdrafts will be available between £25,001 and £10 million per business, while invoice finance and asset finance will be available between £1,000 and £10 million per business.

The scheme launches on 6 April, and the finance can be used for any legitimate business purpose, including growth and investment.

Increased apprenticeship funding

Apprenticeship incentive payments are set to double, with the government paying an employer in England who hires a new apprentice between 1 April and 31 September £3,000, no matter the age of the apprentice. This bonus is an increase on the previous scheme's terms of £1,500 per new hire or £2,000 for those aged 24 and under. These payments come on top of the existing £1,000 that employers get for all new 16-18-year-old apprentices and those under 25 with an Education, Health and Care Plan.

Corporation Tax rise

The first rise in Corporation Tax in 47 years was one of the big announcements on Wednesday, as the government hinted at how it intends to start recouping some of the enormous amount spent on the Covid-19 pandemic.

The headline rate of corporation tax will rise to 25% for company profits of over £250,000 from April 2023. However, businesses with profits of £50,000 or less will continue to pay the current corporation tax rate of 19%, meaning around 70% of companies will be exempt from the hike. However, the rate will be tapered up for businesses as they get closer to the £250,000 profit level.

Income Tax threshold

The announced freeze in the income tax threshold is another way to raise billions in the next few years. While the Chancellor committed to a planned rise in thresholds in April, they'll then be frozen, potentially bringing 1 million more people into the payment range in the next five years and moving 1.3 million into the higher bracket. The basic rate threshold is set to increase to £12,570 and the higher rate to £50,270 before staying at that level until 2026.

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Further Reading

Key Takeaways from Spring Budget 2023: Corporation Tax Rises and Investment Zones

Autumn Budget 2021: Five Key Announcements for Small Businesses

Late Payment Window to Small Suppliers Reduced to 30 Days in the Uk