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Budget 2021: What does it mean for businesses

The Budget is always of interest for business owners, but never has it felt more potentially impactful than right now.

With the government schemes so important for many small businesses at the moment, and an uncertain year still ahead, Rishi Sunak’s announcement was awaited with keen interest.

So, what were the major headlines and changes? Lots was leaked to the press ahead of the statement 12.30 on 3 March, but there were some additional details revealed on the day.

We’ve summarised the most relevant information for businesses below to make it easy to digest.

£5bn Restart Grant scheme 

The latest government grant is focused on helping businesses to reopen. The Restart Grant scheme will support almost 700,000 small business owners including those running shops, pubs, clubs, hotels restaurants, gyms and hair salons.

Like previous grant schemes, funding will be distributed via local councils and varies based on industry and business size.

Non-essential retail businesses will get up to £6,000 per premises while those in hospitality, accommodation, leisure, personal care and gyms can receive up to £18,000, depending on their rateable value.

The government has also set aside £425 million in grants for businesses not eligible for the “restart grants” but who are still suffering because of Covid restrictions.

Finally, the arts sector will be provided with £700m of funding to help the industry recover.

Furlough extended until September 2021

As expected, the furlough scheme will now run until September 2021. For employees, there will be no change to the terms but businesses will be asked to make a contribution of 10% in July and 20% in August and September (once they are able to reopen).

The self-employed scheme will also be extended until September but it will prioritise those most affected by the pandemic.

If your turnover has fallen by more than 30% you will remain eligible for the 80% grant, otherwise you will receive a 30% grant.

Corporation tax hikes

Corporation tax will increase to 25% in 2023, by which point the OBR expects the economy to have recovered.

Small businesses with profits of £50,000 or less will pay Small Profits Rate, which will remain at the current rate of 19%. 

According to the Chancellor this means that around 70% of companies – 1.4 million businesses – will be completely unaffected.

Recovery Loan Scheme

A new Recovery Loan Scheme will also be launched to replace the existing CBILS and BBLS schemes.

The scheme will go live on 6 April with participating lenders to be announced shortly. The government will guarantee 80% of the finance to the lender.

Reduced VAT

Hospitality and tourism businesses will continue to enjoy a 5% reduced rate of VAT for a further six months.

Business rates relief

100% business rate relief will continue until June, and then reduce to two-thirds until the rest of the year.

Help to grow scheme

Around 130,000 small and medium sized businesses will be supported through the new Help to Grow scheme. The £520m government package which will provide digital and management tools and training to firms.

Any small business can apply for a £5,000 grant to pay for government-approved productivity software.

Super deduction

From the 1 April, companies investing in new plant and machinery assets will be able to claim tax relief that the government has called “the biggest tax cut in modern British history”.

Businesses will be eligible for a 130% super-deduction capital allowance on qualifying plant and machinery investments.

They will also receive a 50% first-year allowance for qualifying special rate assets.

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