Business and insurance companies around the UK kept a close on the government’s budget announcement this week.
Many are hoping Budget 2021 offers good news; bumping the economy and bringing us out of a pandemic-stricken 2020. But in case you missed the briefing we’ve collated the need-to-know points for businesses and insurers.
Furlough scheme extension
The furlough scheme will be extended until the end of September. The scheme has been praised for saving millions of jobs – cumulatively, 11.2 million jobs have been supported since the start of the scheme. Currently, CJRS provides employers with financial support of up to 80% of their employees’ salaries. This support is capped at £2,500 per month per employee.
The government also announced that employers will be asked to contribute 10% of the 80% employee salary in July, then 20% in August and September.
Support for the self-employed will also be extended until September. From next month, claims can be made for a fourth grant worth 80% of three months’ average trading profits, up to £7,500 in total. This will then be followed by a fifth grant later in the year, covering May to September.
Corporation tax rise
Corporation tax on company profits will rise to 25%, up from the previous 19%. The rate will apply to businesses with profits over £250,000. Businesses with profits of less than £50,000 will be exempt, their corporation tax remaining at 19%. There are an estimated 1.5 million small businesses which fall under this threshold.
The government assures this value is still lower than the rest of the countries in the G7. Personal income tax and higher income tax will be frozen from April 2022 to 2026.
Tax cut for struggling businesses
This “super deduction” will see a 130% reduction to the tax bill of struggling businesses. The scheme will be in place for the next two years.
The government predict this move will be worth £25 billion over two years as it could boost business investment by 10%. It hopes to unlock the cash reserves of businesses, triggering an investment-led recovery.
UK annual growth forecast
The government has explained because of a rapid vaccine rollout and responsive consumerism, the UK economy should return to pre-COVID level by the middle of 2022. This is despite the £30 billion black hole caused by Brexit, a cost laid upon businesses due to new paperwork and fees.
The UK is set to borrow a peacetime record of £355 billion this year. The government has been criticised for the national debt now over an estimated £2 trillion.
£150 million fund for pubs and clubs
Neighbours can apply for a grant worth up to £250,000 in order to buy their local pub, club or music venue. The £150 million community ownership fund will also allow locals to take over sports facilities, theatres and post office buildings.
This fun aims to ensure local villages and towns are socially supported; the heart and soul of small communities are strengthened post-lockdown.
Hospitality and Leisure helped out with £18,000 grants
Hospitality and Leisure businesses can apply for a grant of up to £18,000 as part of a “restart” initiative.
Hospitality businesses will continue to receive a 100% business rates holiday for the next three months. They will then see their bills discounted by up to two thirds for the rest of the financial year. The reduced VAT rate of 5% for accommodation and food service businesses will be extended until the end of September.
The standard rate of VAT will not return until April next year. VAT has, in total, seen a £5 billion cut. Alcohol and petrol duty will be frozen for at least three months, this is positive news for bars, pubs and distributors. Also, the new employment scheme will continue with Businesses receiving £3,000 for each new apprentice hired between April 2021 and September 2021.
The NTIA have criticised the actions, claiming not enough has been done for the nightlife industry. Whereas the Loungers chairman tweeted the VAT cut is very welcome.
£2 billion council tax rise
As announced in January, all areas in the UK will be facing a 5% bill increase. This is thought to counter the spiralling costs of social care; UK homeowners are set to foot the bill. This rise is seven times the rate of inflation.
Despite growing unemployment levels, this tax hike is said to help fund the government’s furlough scheme and help support local councils. Meanwhile, stamp duty cut will continue until the end of June, with the nil rate band set at £250,000.
Extra funds announced
There has been £400 million put aside to help arts venues in England re-open. The government has been criticized in the past for their lack of support for the devastated arts industry, they hope this measure will help solve the crisis.
Alongside these funds, £300 million has been announced for professional sport and £25 million for grassroots football. This will go to local clubs and venues in the wake of fans being allowed back into the grounds. Many businesses depend on the popularity of local teams and this should hopefully give them something to cheer about.
More information is being processed daily. The government budget has been dually praised and criticised by many, but mostly looks bright for businesses and SMEs. Sector leaders have given Budget 2021 a cautious welcome, the authorities pitching the coming months as a “moment of difficulties” but also of “opportunities”.