The National Budget 2021, how does it affect my business?
4th March 2021
As the nation is seeking to recover from the effects of the Coronavirus pandemic, both on the economy and the wellbeing of our nation, the Chancellor announced his plan this week for rebuilding the economy.
The Budget has the potential to affect several areas of life in the country which leaves many wondering, how will it affect me?
There are several key areas with changes announced that may affect your business and we take a closer look at these below.
A strong focus of the budget was how the government has been providing support packages for businesses and that there will need to be some “balancing of the books” to ensure that the government and country can continue to provide support. Therefore the Chancellor announced changes to the rate of corporation tax, which will rise in 2023 to 25% which (according to the government research) is the still lowest corporation tax rate in the G7. Accepting that many companies are small businesses in the UK, the Chancellor has allowed for a lower rate of 19% to be applied to companies whose turnover is £50,000 or less and once it is over £50,000 there will be a “Taper” of the rate linked to the turnovers to the 25% level.
Corporation tax is applied to all types of company but with the Chancellors tapering system, as the economy seeks to rebuild and expand after lockdown has been lifted, a limited company is still a useful tool to help you move forward with fresh business ideas. Our Corporate team will be more than happy to assist you in creating the right set up for you.
The Chancellor also announced that as part of this tax regime, an allowance to treat losses of up to £2 million to be carried back for three years is to be created.
Business tax regime
The chancellor has sought to create a “Super deduction” of 130% to encourage businesses to invest in their growth (buying new machinery etc).
Loans and grants
New government backed/guaranteed bounce back recovery loans were announced for between £25,000 and £10 million to assist businesses to get the financing they need to grow again after lockdown ends. The government will guarantee a repayment of 80% of these loans to the bank providing them.
A new “restart” grant is going to be made available for businesses for up to £6,000 per venue and to assist sectors that have been hit hardest by the lockdown (hospitality, gyms etc). The government is providing grants of up to £18000 per venue to help kick start re-openings.
In order to help businesses further, the Chancellor also announced that Business rates would still be given a holiday of 100% until the end of June and then going forwards a discount of 66% for the rest of the financial year (9 months) .
As part of encouragements for imports and exports, the government will create “free port” zones around the country with special benefits to businesses, to allow for simpler planning infrastructure and cheaper duties and (potentially) taxes. 8 locations were announced, the closest to Coventry/Warwickshire being the East Midlands Airport near Nottingham.
In a move to establish a green economy for the future, there has been an announcement of a new “green” bank which will invest in green projects across the UK both for private and public sector projects.
In order to encourage the use of the off shore wind farm industry as an asset of the UK, there will be investment in port infrastructure to encourage growth as well as research and development consultations to establish what can be done to encourage innovation in the UK to build on the successes of the country’s vaccine programme.
Tax reviews: whilst the chancellor made announcements regarding corporation tax, income tax etc. some announcements were not made that were potentially expected, regarding Capital Gains Tax and other reliefs being amended. Whilst these were not discussed, a consultation has been announced regarding the banking surcharge. It is also important to note that the consultation report on simplifying and reforming the capital gains tax regime was published in November last year with several suggestions which may affect the future of this area which will have repercussions on estates as well as corporate transactions. We will be writing again about this in the near future so please watch this space. In order to discuss what steps you might take to prepare for these changes, please get in touch.
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Please note that we do not give advice concerning tax. If you are seeking tax advice then please contact a qualified tax advisor.