Budget 2021. What it means for small business owners.

Many of  the major budget spending headlines has been pre-announced in the days leading up to the Chancellor’s statement:

  • £5bn further support for retail and hospitality
  • Furlough extended until September (with tweaks in the employer contributions)
  • Money for the arts and sports to help get these performances and pastimes back up and running

While the spending plans had been trumpeted, the tax plans were more muted. Today we began to hear about how we would start to chip away at the COVID debt mountain.

Corporate Tax

Tax on company profits will rise from 19% to 25% starting in 2023. There is a tapered approach to how the new tax will be applied.

  • Less than £50,000 profit – tax remains at 19%
  • A taper between £50,000 and £250,000 with only businesses with profits >£250k paying the new full 25% rate.

Businesses whose annual profit is a shade over £50k may be able to use further employer pension contributions to reduce the profit figure downwards.

Personal Allowances

No changes to income tax, National Insurance or VAT.

  • Personal income tax allowance to be frozen at £12,570 from April 2022 to 2026
  • Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026

Other Business Highlights

  • Tax breaks for firms to “unlock” £20bn worth of business investment
  • Incentives for firms to take on apprentices to rise to £3,000 and £126m for traineeships
  • Lower VAT rate for hospitality firms to be maintained at 5% rate until September
  • Interim 12.5% rate will then apply for the following six months
  • Business rates holiday for firms in England to continue until June with 75% discount after that
  • A new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost.
  • New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas
  • Contactless payment limit will rise to £100 later this year

Jason McClounan of Confian Accountancy Services said about the budget: “This budget is set against the background of the ongoing pandemic and ‘stay at home’ message. It was inevitable and right that the emphasis would be on providing continued necessary support for people and businesses. However we did see a glimpse of what is to come once society is back to operating with fewer restrictions. Businesses that have been such large beneficiaries of support will be expected to start paying back in. But it was interesting to see that businesses at lower end of the profit scale were largely left alone. This will be a relief to small businesses owners, many of whom count themselves among the ‘forgotten’ as they are Limited Company Directors who have not benefitted from any of the Government schemes.

Remember that this is just the first word on public finances, not the last, so expect the Chancellor to return in 12 months asking for more”.