The Budget has left much to digest for business…
Budgets come and go with a tweak to income tax allowances here and a penny or two on wines and spirits there. But this Budget felt different. With more debt than the UK has faced in 50 years, Chancellor Rishi Sunak needs to at least begin the process of balancing the books (although that process will, as he admits, take many years). Rumours were rife heading into today that business would be expected to shoulder much of the pain, but the reality is far more complex. If you run an SME, here’s how the latest Budget will affect you.
Corporation Tax rises
One of the big headlines is that corporation tax is set to increase to 25% (from the current 19%) from April 2023. For SMEs worried about a delayed but significant rise in tax, however, there’s some potentially good news. Companies with profits below £50,000 will keep paying corporation tax at 19%. Only organisations with profits above £250,000 will pay the full 25%. Everyone in between – which would certainly account for many of the companies whose payrolls we support – will pay tax on a sliding scale, but below the 25%.
Potentially the largest tax cut in UK history, Rishi Sunak has announced a two-year scheme which will enable companies investing in qualifying new plant and machinery to benefit from a 130% capital allowance, effectively amounting to a tax cut of 25p for every pound they invest.
What precisely counts as a qualifying investment hadn’t been confirmed at time of writing but you can find more about the announcement here.
Furlough continues to September
The scheme will now end on 30 September, although it will become progressively less generous. In July, employers will need to contribute 10% of wages. In August that will increase to 20%.
National Living Wage (NLW) increases
From April 2021 payroll teams will need to factor in a new NLW of £8.72 per hour.
Increase in apprenticeship funding
Also from April 2021, incentive grants for apprentices aged 25 or over are doubling from £1,500 to £3,000 and the scheme will be extended to September 2021, a move broadly welcomed by employers. Association of Employment and Learning Providers chief executive Jane Hickie told FE Week that the boost could be a “game-changer” and prove to be “particularly attractive to smaller businesses”.
Recovery Loan Scheme
The Chancellor announced a new loan scheme taking the place of the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS), launching from April 6. UK businesses of any size will be able to apply for a loan or overdraft of £25,000 to £10m until the end of 2021, repayable over 6 years. Asset and invoice finance of amounts between £1,000 and £10m will also be available (with terms over three years) and all will be backed by a government guarantee of 80 per cent.
Qualifying businesses will be able to apply for the loans even where they have already accessed funding from CBILS or BBLS.
Other grants and support
Non-essential retail businesses will be able to access a £6,000 cash grant per premises. For hospitality and leisure businesses, that grant will be £18,000 per premises.
Business rate relief for eligible retail, hospitality and leisure companies will continue until the end of June (and be discounted by two thirds for the remainder of the financial year).
Hospitality and tourism businesses will also have their current 5% VAT rate extended to the end of September 2021.
Let us help ensure your payroll is ready to implement the changes announced in the budget. To find out how we can support you, talk to us.