Published on March 3rd, 2021 | by The GC Team0
Budget Day: one for the optimists?
As Chancellor Rishi Sunak sat down after an hour of delivering his Budget in the Commons this afternoon, there was a feeling that much of what he announced had come as no surprise, given the extensive media trailing of his intentions over the past few days.
As it turned out, there were still a few new rabbits for him to pull out of the Treasury bag in a Budget entitled “Protecting the Jobs & Livelihoods of the British People.” He began with his now-familiar mantra “whatever it takes,” and outlined a three-part plan: 1). Continuing to do whatever it takes; 2). Fixing the public finances; 3). Beginning to build the future economy. The full text is, of course, available on the Government website, but we have pulled out some highlights – some already known, some new – that are most relevant to our industry.
Under the “whatever it takes” heading, the extension of the furlough scheme was, as expected, extended till the end of September 2021. The Government will continue to pay 80% of the salary of furloughed workers to the end of June; employers will be asked to contribute 10% of that in July, and 20% in August and September. Self-employed support will continue till September, and the scheme will be extended to the newly self-employed, until now unable to benefit, provided they have filed a self-employed tax return by midnight on 2nd March.
The National Living Wage will be raised to £8.91 per hour from April, and the direct grants to businesses scheme, scheduled to end in March, will be replaced by a new scheme in April.
A new business recovery loan scheme, offering loans from £25,000 to £10 million, will be put in place, with a Government guarantee to lenders of 80% of the loan.
The business rates holiday will continue at 100% for three months, with a following period of nine months at two thirds relief. There will be grants of up to £6,000 to help shops reopen as the lockdown eases.
The reduction of VAT to 5% will continue until September, go up to 12.5% for the following six months, and return to standard rate in April 2022. There will be no increase in income tax, National Insurance or VAT, but the personal tax threshold will be frozen until 2026. Corporation Tax will rise in April 2023 to 25%, but small businesses with profits of £50,000 or less will remain at 19% CT rate, with a tapered rise above £50,000 up to £250,000, meaning, says Mr Sunak, only 10% of companies will be subject to the full 25% CT rate.
Announced as “the biggest business tax reduction in recent history,” Mr Sunak’s “Super-Deduction” – a two-year tax offset of 130% for business investment – was an interesting attempt to get businesses to invest cash back into their organisations.
For SMEs, a “help to Grow” initiative was announced, offering Government support for management training, and free schemes to help SMEs develop digital skills.
Fast reactions to the Chancellor’s statement included Nic Redfern, UK finance director of NerdWallet, who said: “The Government had little choice but to extend the business rates holiday, along with the furlough scheme and VAT cuts. Given the understandably cautious route out of lockdown, it is only right that businesses – particularly those within the hospitality, retail and leisure sectors – continue to receive financial aid.
“Positively, the Chancellor has realised that extending existing policies will only take business recovery so far. And so, he’s gone further still, and it’s incredibly encouraging to see a number of initiatives to help SMEs, including incentives to hire trainees and apprenticeships, a new visa system for people with high-level skills, and freezes on various taxes.
“The recovery of UK businesses will not occur overnight. However, with such strong Government backing, I am optimistic that organisations will begin to return to pre-COVID levels over the coming months, and go from strength to strength.”
Atul Bhakta, CEO of One World Express, added:“The Chancellor has lived up to his promise by prioritising emergency support for UK businesses.
“Ongoing pressures caused by COVID-19, not to mention the additional challenges posed by Brexit, have meant that as many as 25% of British companies fear they will not survive until the end of the year, according to a recent study by One World Express. So, the extension to the furlough scheme, coupled with reinforced support for the self-employed and prolonged VAT cuts, offers some welcome relief.
“Encouragingly, the Chancellor has gone further still, by protecting the profits of smaller businesses, and continuing to invest in the innovation of UK businesses. Naturally, the devil will be in the detail – and I eagerly await the full publication of Mr Sunak’s plans. For now, however, today’s Budget has certainly given UK businesses cause to be optimistic about the future.”