James Pinchbeck, Marketing Partner at Streets Chartered Accountants, breaks down the March 2021 Budget and what it means for business.
What were we dreaming about or anticipating on a grey day in March, nearly 12 months since the start of lockdown? Perhaps for many it wasn’t all a ray of sunshine in the Chancellor, Rishi Sunak, as he delivered the Budget 2021. As the announcements might not have us grabbing for the factor 50 sun cream, he certainly did give a level of optimism for businesses and business owners.
In his opening address he highlighted that we were experiencing a swift and sustained economic recovery in the face of the pandemic. Whilst the cost of the necessary measures to support the economy, jobs and livelihoods was at a level only comparable with this faced over the period of the World Wars, our long-term economic prosperity could be underpinned through investment in improving productivity, harnessing innovation and thru focusing on a more sustainable and green economy which embraced technology and skills.
Our journey to the future though starts within the here and now, with, in the coming months, an emphasis on supporting the economy and businesses whilst at the same time safeguarding jobs as well as ensuring those unemployed or looking for work can find suitable vacancies. Certainly, it's clear support through apprenticeships and skills training is high in agenda.
In outlining the Governments response and support for those affected and impacted by the pandemic, the Chancellor reiterated that the roadmap for our exit out of lockdown was irreversible. It was then great to hear that measures of support for businesses, including employees and the self-employed are going to be in place for perhaps considerably longer than might have been thought just before today. This takes into account that for a lot of, getting back to business, re-opening and going back to pre pandemic trading levels is going to take some time, not least for sectors such as the entertainment, hospitality & leisure, bricks and mortar non-essential retail, the arts and sport.
Looking at the key announcements and measures to aid businesses, the workforce and also the self-employed the following were perhaps key:
- Furlough to remain in place until the end of September, with employers being inspired to contribute towards salary in the rate of 10% in July and 20% in August and September
- For businesses looking for support to ‘restart’ their business there is the introduction of the Business Restart Grant, with £6,000 open to non-essential retail and £18,000 open to those in the hospitality sector. This is in addition to the provision of the new Recovery Loan Scheme which will provides loans from £25,000 up to £10,000,000.
- Those taking advantage of the business rates holiday will be able to continue to do so until the end of June after which relief will be reduced to two thirds.
- Those who are self-employed will benefit from an extension towards the Self-Employed Income Support Scheme and also the provision of a 4th and 5th grant application. The Scheme will even now be open to those who have not had the opportunity to apply and the newly self-employed if they filed a Self-Assessment Tax Return by midnight on 2nd March.
- The hospitality and tourism sector may benefit from a continuation in the rate of VAT charged from 20% to 5% 'till the end of September, at which time the speed will increase to 12.5% for 6 months.
- For many small businesses facing increased and tough competition, the Chancellor announced measures to introduce a Help to Grow programme which provides management training and use of technology and financial support for purchasing software – hopefully accounting software
- In addition, the housing sector received perhaps an already anticipated boost with the extension of the removal of stamp duty on house sales up to £500,000. This will remain in place until 30th June.
Perhaps the headline grabber wasn’t the pending increase to Corporation Tax, or even the fact that duties on fuel and alcohol remain unchanged however it was the introduction of the ‘super deduction’ tax relief available to those making business investments. The two-year tax break allows companies to deduct 130 percent of their investment from their taxable income, cutting their taxes by the equivalent of 25p in the pound.
Overall, it had been perhaps as expected a Budget for that here and now, but the Chancellor was a lot more than clear about the need to ensure Government borrowing and the budget deficit are not only held in check but that the national burden of debts are reduced, whether this is in the lifetime or the next generation of Chancellors, can be. We would though be naive to think we shouldn’t expect tax hikes and reform of tax legislation at a time when it might at least be more palatable.
For now, given the element of certainty provided, the scene and conditions have been set for businesses to operate on and put in place their roadmap to recovery.