The budget announcement this week was certainly historic - it's been an unprecedented year and many tuned in to find out how the measures announced could impact them.
Both the self-employed and limited company directors have found the last year particularly challenging - with access to support from the government either being simply not available or restricted. Does the 2021 budget change this?
It goes in the right direction but there are areas where it feels like (in comparison to those employed) it does not go far enough to help business owners struggling due to the lockdown restrictions and the decreased spending which has come hand-in-hand with the pandemic.
Winners will include those who have small business on the high-street with the available "Restart Grants" the extension of business rates relief and continued VAT cuts. It is also helpful that the corporation tax rate will not rise until we see some recovery and the rise will not impact businesses with profit under £50,000. The extension of the £20 a week Universal Credit uplift will also be welcomed by families which have been hard-hit by the pandemic.
For me, the most over-looked business owner will be freelancers or consultants who work from home. The Restart Grant will not apply to them and there is no similar "furlough" announced to cover lost income - small limited company directors who take most of their income through dividends just aren't covered. There is an option for directors to "furlough" themselves but this means - not working and likely a small pay out based on previous remuneration structure.
The two measures which may help tide limited company directors through are:
The Recovery Loan scheme.
Extension of carry back of losses - from one year to three years. This may be limited in application as many free-lancers don't have a lot of fixed costs and overheads so - although they have lost income due to Covid-19 - this may not translate to a large loss in the year.
Both the above fall short of the more straight-forward grant schemes available to other workers and many Directors will feel that they remain excluded from support in these extremely challenging times.
In addition, though widening the scope of the SEISS feels positive - with 600k self employed being eligible now - the reality is that many of those doing their first 19/20 return are likely to be loss making, with various startup costs impacting the bottom line. As such, another limitation on support available for business owners.
As such - I expect continued lobbying of the government -and I encourage us all to remember to support our small businesses. They are so important - shaping and contributing so to our economy and our culture - and we need to rally around them during these difficult times.
Below is a roundup of what I think will be most relevant to micro businesses in summary:
Furlough scheme extended to the end of September 2021
The furlough scheme (Coronavirus Job Retention Scheme or ‘CJRS’) will be extended until the end of September 2021. Workers will continue to receive 80% of their current salary up to £2,500 whilst not working. Employers will need to make a contribution of 10% of the worker’s salary for unworked hours in July, and a 20% contribution in August and September.
Fourth Self-Employed Income Support Scheme (SEISS) announced, scope widened and fifth grant forthcoming
It was thought that up to 600,000 of people who were "newly self-employed" (submitting their first SATR for 2019/20) have been previously excluded for grants one to three. The scope has widened meaning that they can now be eligible for the grant.
The fourth round of SEISS - available in April - is calculated as 80% of average trading profits capped at £7,500 for three months.
There will be a fifth grant to cover May, June, and July which will become available over the summer. For this grant - a level of conditionality is introduced. If your turnover has fallen by 30% or more, you’ll receive the full 80% grant. If turnover has fallen by less than 30%, the grant is reduced to 30%.
Remember - grant income is taxable so make a note to include this in your 20/21 self-assessment.
Recovery Loan Scheme
Previous schemes - Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme come to an end on 31st March 2021. From 6th April 2021, the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.
New Restart Grants to help businesses reopen in England
New ‘Restart Grants’ to help businesses in England reopen when lockdown begins to ease from April 2021 were announced. These are up to £18,000.
Corporation Tax to increase for larger companies
The Corporation Tax rate will remain at 19% for business profits up to £50,000. From April 2023, there will be a tapered increase to a main rate of 25% for profits over £250,000.
The VAT cut to 5% will remain in place until the end of September for the hospitality and tourism industries. It will then rise to 12.5% for another six months before returning to the full 20% rate in April 2022. No other changes are being made to VAT.
Business investment tax relief and loss relief for businesses
A new “super-deduction” tax relief was announced for businesses to reduce their tax bill by 130% of what they spend on investment. The Chancellor also announced the extension of the normal loss carry-back rules from one year to three years for losses of up to £2 million. This will enable tax repayments to be claimed, providing relief and cash flow support for businesses.
Business rates reliefs
Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1st April 2021 to 30th June 2021.
Universal Credit and Working Tax Credit
The government announced that the temporary additional £20 Universal Credit uplift will be extended by a further six months and also announced a £500 one-off payment for eligible Working Tax Credit claimants.