Budget 2021: What does it mean for your business?

Budget 2021: What does it mean for your business?

With the Chancellor, Rishi Sunak unveiling his 2021 budget in the House of Commons yesterday, we thought we’d get our Finance guru and CFO, Rachael Willis to give us her thoughts on Mr Sunak’s recovery plan for the UK and specifically what that means for our customers.

“My key takeaways from the budget….

With government lending as a % of GDP at an eyewatering high and with restrictions and furlough still in place, the government is having to find ways to start to fill up its piggy bank. It’s no surprises that the emphasis has been to not increase the tax on individuals, so Corporation tax is on the rise.  My key take always are as follows….

Some good news for businesses

  • Super Capital Allowances – designed to stimulate business investment, an allowance of 130% of eligible spend will be available for 2 years till March 2023.  (50% for special rate assets).  This allowance comes into force in April 2021 (up to this date will be an apportionment of the annual investment allowance)
    •   In simple terms, a qualifying asset purchased for £100k will result in a deduction of £130k from that year’s taxable profits (on which corporation tax is then payable).  Obviously the profits have to be there in order to make the deduction, but this will result in lower taxable profits.
    • Worth noting that there is no cap on this super allowance – so if investment is at £10m, then £13m of allowance will be received. This could result in businesses creating taxable losses which can the be carried back to the previous year to offset against tax paid.
  • The rates relief holiday is extended to end of June, and further discount for the subsequent 6 months if businesses are still closed.
  • Incentives to take on apprentices increase up to £3000
  • Grants of up to £18k are being offered under a business restart programme.   This is for non -essential retail to assist during the phased reopening timeline.

The not so good business news (although not unexpected)

  • After a decade or more of reducing rates, corporation tax is increasing by 6% to 25% from April 2023.  This new rate is applicable on all profits if they are in excess of £250k.  Worth noting that If total profits are less than £50k then tax will remain at 19%, and on a sliding scale up to £250k.

And for individuals….

  • There are no changes to income tax, NI or VAT rates which was a key promise from this Government.  So the good news is no additional tax to pay on earnings immediately, however personal allowances and tax thresholds are being frozen for the next 5 years.  This means as people receive pay rises, they may cross the thresholds into tax brackets earlier.
  • National minimum wage increasing from £8.72 to £8.91 per hour from April  – good news for those being paid at these levels, although this will be a cost to businesses.
  • Furlough is being extended to end of September, although employers will need to contribute 10% in July and 20% from August
  • Stamp duty holiday extension – up to £500k up to end of June
  • No increase on alcohol or fuel duty, but tobacco to increase by inflation +2%.

NB! Just my views – consult your tax advisors if you need further info. “


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