How the March 2021 Budget will affect your business
Whilst the word ‘unprecedented’ is being thrown about like a squash ball beaten against the wall of a court– we are living in extraordinary times.
Chartered Certified Accountant
Hayley Hedges-Quinn
No government has borrowed so much money since WW2, businesses are learning to continuously adapt in vastly unchartered waters, target markets are suddenly shifting demographics and technological advances are accelerating at astonishing rates.
But what does this actually mean for small businesses? How will the 2021 budget affect them?
The real question is how will the 2021 budget affect business? After all, it’s the chancellor’s budget decisions which have the real power to impact businesses.
Now the dust has settled and we’ve had time to assess the impact, here’s Hedges-Quinn & Co’s top five budget points we feel will most affect start-ups, SMEs and self-employed individuals:
Now the dust has settled and we’ve had time to assess the impact, here’s Hedges-Quinn & Co’s top five budget points we feel will most affect start-ups, SMEs and self-employed individuals:
1
Extension period for carrying back trading losses
In March 2021, the Chancellor announced losses arising in 2020/21 and 2021/2022 can now be carried back against profits of the same trade of the three previous tax years, unlike the one year we are normally given. A maximum of £2m of losses for each of the two years can be carried back. However, businesses will be required to make an S64 claim for at least one of the two years before unrelieved loss can be carried further back.
In March 2021, the Chancellor announced losses arising in 2020/21 and 2021/2022 can now be carried back against profits of the same trade of the three previous tax years, unlike the one year we are normally given. A maximum of £2m of losses for each of the two years can be carried back. However, businesses will be required to make an S64 claim for at least one of the two years before unrelieved loss can be carried further back.
2
130% super deduction
Companies who invest in new plant and machinery expenditure during 1st April 2021 – 31st March 2023 will receive a 130% super deduction. This includes items such as manufacturing equipment, computers, machines and main pool plant and machinery fixtures in properties. The chancellor is hoping investment will help carry us through and further spur businesses.
Companies who invest in new plant and machinery expenditure during 1st April 2021 – 31st March 2023 will receive a 130% super deduction. This includes items such as manufacturing equipment, computers, machines and main pool plant and machinery fixtures in properties. The chancellor is hoping investment will help carry us through and further spur businesses.
3
Corporation tax rates set to rise from April 2023
From April 23rd 2023 corporation tax for firms earning more than £250,000 is set to rise to 25%. A tapering rate will be introduced for profits between £50,000 to £250,000 and those businesses earning less than £50,000 will remain paying the current 19% corporation tax. The chancellor has predicted approximately 70% of UK business will not be affected.
From April 23rd 2023 corporation tax for firms earning more than £250,000 is set to rise to 25%. A tapering rate will be introduced for profits between £50,000 to £250,000 and those businesses earning less than £50,000 will remain paying the current 19% corporation tax. The chancellor has predicted approximately 70% of UK business will not be affected.
4
CJRS available until the end of September 2021
Until 30th June 2021, employers can reclaim up to 80% of the wage cost of furloughed employees with a cap of £2,500 per month, per employee.
From 1st July 2021 onwards, the CJRS scheme slowly dwindles until it finishes at the end of September 2021. July sees a 10% employer contribution with the grant topped at 70% of wage costs up to £2,187.50.
In August and September employers will be responsible for a 20% wage contribution, with 60% of wage costs coming from the scheme.
Until 30th June 2021, employers can reclaim up to 80% of the wage cost of furloughed employees with a cap of £2,500 per month, per employee.
From 1st July 2021 onwards, the CJRS scheme slowly dwindles until it finishes at the end of September 2021. July sees a 10% employer contribution with the grant topped at 70% of wage costs up to £2,187.50.
In August and September employers will be responsible for a 20% wage contribution, with 60% of wage costs coming from the scheme.
5
COVID-19 Self-Employment Income Support Scheme (SEISS) grant extension
The SEISS grant has been extended with a fifth (and final) grant from May 2021 until the end of September 2021 and is now based upon the 2019/20 tax return rather than 2018/19.
The fourth grant (which will go live in the middle of April 2021) will see successful claimants continuing to receive 80% of their average profits (capped at £2,500) for three months.
The fifth grant works slightly differently: only businesses where turnover (not profit) have fallen by at least 30% will get the full grant calculated at 80% of average trading profits. Businesses whose turnover has fallen by 30% will receive 50%, or 30% grant where turnover has fallen by less than 30%.
The SEISS-4 and SEISS-5 grants will only be available to those who traded in both 2020/21 and 2019/20 and submitted last year’s tax return by 2nd March 2021. All claimants must be trading in 2021, or their business temporarily closed due to coronavirus restrictions. You must also declare intent to continue trading in 2021.
The portal to claim the SEISS-5 grant will be open in late July 2021.
The SEISS grant has been extended with a fifth (and final) grant from May 2021 until the end of September 2021 and is now based upon the 2019/20 tax return rather than 2018/19.
The fourth grant (which will go live in the middle of April 2021) will see successful claimants continuing to receive 80% of their average profits (capped at £2,500) for three months.
The fifth grant works slightly differently: only businesses where turnover (not profit) have fallen by at least 30% will get the full grant calculated at 80% of average trading profits. Businesses whose turnover has fallen by 30% will receive 50%, or 30% grant where turnover has fallen by less than 30%.
The SEISS-4 and SEISS-5 grants will only be available to those who traded in both 2020/21 and 2019/20 and submitted last year’s tax return by 2nd March 2021. All claimants must be trading in 2021, or their business temporarily closed due to coronavirus restrictions. You must also declare intent to continue trading in 2021.
The portal to claim the SEISS-5 grant will be open in late July 2021.
We know some of this information may be quite a bit to take in! If you would like to understand more on how the budget will directly affect you and your business, and changes to put in place now, please call Hayley on 01473 657853 for a chat.
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