Chancellor Rishi Sunak today delivered his budget, setting out the government’s priorities for the coming years. Trailed as a COVID recovery package it includes a continuation of some of the support packages put in place to mitigate the worst effects of the pandemic.
Among the key points were:
- Corporation Tax rate increased to 25% from April 2023.
- £5bn restart grant for businesses to help companies get going after lockdown.
- Total direct cash support to businesses has reached £25bn during the pandemic.
- As the government-backed bounce-back loan (BBL) and coronavirus business interruption loan scheme (CBILS) come to an end, the Treasury is launching a new loan scheme to run until the end of the year. Loans can be between £25,000 and £10m.
- Hospitality and leisure businesses pay no business rates for three months, then rates will be discounted for the remaining nine months of the year by two-thirds, in a £6bn tax cut.
- 5% reduced rate of VAT will be extended until the end of September. Then it will be gradually increased, at 12.5% for six months, before returning to the standard rate from April 2022. Sunak says this is a cut worth £5bn.
- The inheritance tax threshold, pensions lifetime allowance, annual exempt allowance from the capital gains tax, and VAT exemption threshold will also be frozen.
- Trading losses arising in tax years 2020/2021 and 2021/2022 can be carried back for three years. There are some exceptions, although we are waiting for further detail to be published.
- Furlough to be extended until the end of September 2021
- Government to continue paying 80% of employees’ wages for hours they cannot work
- Employers to be asked to contribute 10% in July and 20% in August and September
- Support for the self-employed also to be extended until September
- 600,000 more self-employed people will be eligible for help as access to grants is widened
One of the key announcements in the budget for business centered on corporation tax. The Chancellor bowed to pressure to increase rates but kicked the can down the road until 2023 when the rate will change. So, from April 2023, the rate of corporation tax will increase to 25%. Sunak says this will be the lowest rate in the G7.
It’s worth pointing out that businesses will only be impacted if they are making profits, and the change will only come in once the OBR forecasts the economy will be recovering. The rate will be tapered so that only businesses with profits of more than £250,000 will be taxed at the full 25% rate; that means only 10% of companies will pay the full higher rate. Companies with profits of less than £50,000 will remain at 19%.
“It’s a tax rise on company profits, but only on the larger more profitable companies, and only in two years’ time,” Sunak says.
The government is also investing £25bn by allowing a 130% super-deduction on tax for investments made by companies. This means firms can cut their taxes by up to 25p for every pound they invest.
Sunak also announced in the budget that 130,000 SMEs would be given access to the Help to Grow scheme, aimed at giving access to digital and management tools needed to innovate, grow and help drive recovery.
The pot for the Help to Grow scheme is £520m but should provide some motivation for customers that had to shift to remote working during the coronavirus pandemic and want to make more permanent moves to embrace the cloud.
If you have any questions about how the budget will affect your business in the UK, then please get in touch.