Rishi Sunak has now delivered the Spring Budget 2021, the first Budget in almost a year, after the last Autumn Budget was cancelled because of the pandemic. With 700,000 people having lost their jobs since March 2020 and the economy on its biggest fall in 200 years, Sunak introduced a number of measures designed to help businesses and improve the economy.
As contractor accountants, we’re taking a closer look at the Budget and at what it means to you.
What We Think of the Budget
Richard Hepburn ACCA, Operations Manager at Gorilla Accounting, has this to say about Rishi Sunak’s announcement:
“Our view is that the Budget is mainly positive for small businesses and self-employed. The government introduced further support in the extension of the Job Retention Scheme and Self-Employed Support Scheme, with an extension to the reduced VAT rate for hospitality and business rates.
“The planned rise in Corporation Tax will be from April 2023, so plenty of time to plan, and with the highest rate only applying to businesses with taxable profits of over £250,000 this rise is mainly aimed at larger businesses.”
In more detail, the Spring Budget included:
Funding for Businesses
Chancellor Rishi Sunak announced a new Restart Grant, set to begin in April as a way “to help businesses reopen and get going again”.
In total, the government is offering £5 billion in grants on top of the £20 billion it already provided. More specifically, retail businesses are expected to receive up to £6,000 in grants per premise, and hospitality and leisure businesses will get grants of up to £18,000.
Sunak also said that sporting, cultural and arts organisations will receive £700 million to help them reopen. A £150 million fund will be set up to help communities take ownership of pubs, theatres, shops or sports clubs that are on the verge of closing.
The business rates holiday will be extended to the end of June as well.
Rishi Sunak said that “for the remaining nine months of the year, business rates will be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open”.
So, the business rate was due to end on March 31, but will now be extended in full until June 30, continuing for a further nine months with a reduction of 66%.
When it comes to VAT, the 5% reduced rate applied to the hospitality sector will be extended for six months until September 30: there’ll be an interim rate of 12.5% for another six months. The standard rate is only set to return next April, for the 2022/23 tax year.
The registration threshold for VAT will stay at £85,000 until 2024.
Income and Corporation Tax
Regarding income tax, the threshold for the basic rate taxes will be £12,570 next year and, for higher-rate payer, it will be £50,270. This will then be frozen until 2026.
However, limited company owners will see corporation tax rise to 25% in 2023. While Sunak maintains that the UK has the lowest corporation tax in the G7, this is still not the news limited company owners wanted to hear. The chancellor said that his decisions might not be popular but they’re “honest and responsible”.
Still, only businesses with profits of more than £250,000 will be taxed at this rate. Small businesses with profits of up to £50,000 won’t need to worry about it, as their corporation tax will stay at 19%.
Any company with profits falling between £50,000 and £250,000 will pay corporation tax at a tapered rate between 19% and 25%.
Job Retention Scheme
The government is extending furlough payments for employees who can’t work because of pandemic restrictions until the end of September. After July, businesses will have to contribute 10% and, in August and September, 20%.
Previously, over 600,000 self-employed individuals who didn’t receive the government’s support package will be able to claim direct cash grants as part of SEISS. This means that the self-employed support scheme has been extended and people who became self-employed back in the 2019/20 tax year will be able to benefit from it.
The government looks to help those whose turnover has reduced by 30% or more.
As accountants for landlords, we like to stay on top of all industry-related news. And the Budget confirmed that the Treasury will underwrite 95% mortgages on properties that are valued up to £600,000. This will apply to first-time buyers and aims to support those looking to get on the property ladder.
Additionally, the 0% stamp duty rate on properties of up to £500,000 will be extended to the end of June instead of March. From July to September, the rate band will be £250,000, after which it will return to £125,000.
Rishi Sunak also mentioned a new loan scheme introduced to replace the bounce back loan scheme. The business recovery loan will now be available. There will also be a super deduction scheme that will be introduced for companies looking to make investment with a 130% deduction from the tax bill. There will be further support for businesses looking to take on apprentices as well.