What does the Budget mean for your business?
Rumours surfaced over the last two days that Rishi’s furlough scheme would be extended beyond the 30 April end date, and that was confirmed on Tuesday evening. We now know that the scheme will be extended until the end of September 2021, with employers required to increase their contribution with effect from 1 July 2021.
Under the current system, employers are only required to pay the tax and national insurance contributions, while the government meets 80% of employee’s wages (up to the £2,500 per month cap). From 1 July 2021, the government’s contribution will reduce to 70% with employers expected to contribute 10%, and those figures reverting to 60% and 20% respectively during August and September.
The extension will be welcome news for employers who are still suffering a drop in demand from their customers and those in sectors such as leisure and tourism who will still not be fully operational by the end of April. As expected, the announcement has still been met with criticism from some quarters, with the main objection being the timing. Many employers have questioned why the extension was not announced earlier which would have assisted their planning.
In today’s Budget, Rishi confirmed the furlough extension but also announced the fourth and fifth SEISS grants for the self-employed. Helpfully, an estimated 600,000 additional people who could not previously access these grants, will be able to do so, providing they submitted a tax return by yesterday evening. Grants will be available to claim from April 20221, of up to £7,500 based on 80% of three months average trading profits.
Employers are also being encouraged to recruit new apprentices with payments of £3,000 per new hire available to all businesses. This doubles the previous incentive and should encourage businesses to consider apprentices which will aid unemployment and create opportunities for those starting their careers.
The Chancellor also announced a number of new recovery grants including “Restart Grants” of up to £6,000 per premises for non-essential retail and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gyms. In further welcome news to the hospitality and leisure sector (which has been hit harder than most) the temporary reduction in the VAT rate has been extended by six months up until 30 September 2021. A new 12.5% rate will then apply to this sector for six months until 31 March 2022. While finally, the business rates holiday for leisure and tourism will continue at 100% until 30 June 2021.
Obviously, the support needs to be recouped somewhere, and the Chancellor has confirmed that corporation tax will be increased to 25% from April 2023. However, corporation tax is only payable on profits, and will be reduced to 19% for businesses posting profits of £50,000 or less. The amount of tax payable will be tapered upwards, with only profits of over £250,000 taxed at 25%. This should mean that business posting smaller profits will not be as adversely affected by the hike.
While no Politician is ever going to please everyone, I was quite impressed with the budget and Rishi’s initiatives during the pandemic. There has been much criticism over the lack of support available for certain self-employed individuals and this has now largely been addressed by today’s announcement and the additional access to self-employed SEISS grants.
One of the most exciting revelations, was the announcement that Plymouth will be designated as one of 8 new “freeports”. We await further details in this regard, but do know that they encourage free trade and investment which will no doubt create jobs for Plymouth and stimulate our local economy.