Yesterday, Chancellor of the Exchequer, Rishi Sunak delivered his much-anticipated Spring Budget, outlining a £65bn three-point plan focused on supporting British people and businesses, fixing the public finances and building the UK’s future economy.
During his speech, the Chancellor said he has done everything he can to support the economy and that he will continue to do “whatever it takes” to help the UK recover from the pandemic.
For the UK’s SMEs, who have been amongst the worst hit during this pandemic, the raft of measures announced today could provide the vital additional support needed to help them recover during this period.
To help, we’ve highlighted the key announcements that will impact SMEs.
Support for businesses
To help businesses survive the next few months and begin their recovery post-Covid, the government has introduced a number of new schemes that will provide much needed financial support – especially for industries such as hospitality and leisure that have faced the toughest coronavirus restrictions. These include:
Restart Grants – the Chancellor announced the launch of a new Restart Grant which aims to help businesses reopen and get going again after the UK’s national lockdown. From April, non-essential retail businesses, who will open first, will receive grants up to £6,000. Hospitality and leisure businesses will open later and be under stricter restrictions and so will receive larger grants of up to £18,000.
Recovery Loan Scheme – The Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme will both come to an end in March as planned, but they will now be replaced with a new Recovery Loan Scheme which will launch on 6 April.
The scheme will run until the end of 2021 and businesses of any size can apply. Loans will be available through a network of accredited lenders, whose names are yet to be announced and there will be different types of finance available. Term loans and overdrafts will be offered from £25,001 up to a maximum of £10m per businesses, while invoice finance and asset finance will be available between £1,000 and £10m per business.
Businesses that have already received support under the existing COVID-19 loan schemes will still be eligible to access finance under this scheme, if they meet all other eligibility criteria set out in the government’s guidelines.
Business rates holiday – As anticipated, the 100 per cent business rates holiday was extended until the end of June and for the remaining nine months of the year will be discounted by two-thirds up to a value of £2m. The Chancellor stated that the vast majority of eligible businesses will receive a 75 per cent cut in their business rates bill next year.
Reduced rate of VAT – To continue protecting jobs in the hospitality and tourism sector, the 5 per cent reduced rate of VAT will be extended for six months until the end of September. Following this, it will have an interim rate of 12.5 per cent until April next year.
Corporation Tax Increase
Whilst many positives came from the Budget announcement, as expected, so did a number of tax increases. In a bid to repair the UK’s economy, the Chancellor announced an increase in corporation tax, however in order to protect the poorest households he stated there would be no increase to income tax, national insurance or VAT.
The change will see corporation tax increase from 19 per cent to 25 per cent from April 2023. Sunak said: “Yes, it’s a tax rise on company profits. But only on the larger, most profitable companies. And only in two years’ time.”
This rate will only be paid on company profits and the Chancellor made the point that this will still be the lowest corporation tax rate in the G7 – lower than the US, Canada, Italy, Japan, Germany and France.
To protect small businesses, the government has introduced a Small Profits Rate which is maintained at 19 per cent for businesses whose profits are £50,000 or less. The Chancellor stated that this would mean 70 per cent of businesses will be completely unaffected by the tax increase.
On top of this, a new ‘Super Deduction’ was announced, which will mean for the next two years, when businesses invest in new equipment, they will be able to offset all of the costs against tax, plus an additional 30 per cent.
To provide much-needed reassurance to businesses and workers across the UK, and to continue protecting millions of jobs, the government announced it would be extending the Coronavirus Job Retention Scheme (CJRS) – also known as the furlough scheme – until the end of September.
Employees will continue to receive 80 per cent of their wages for hours not worked, but from July the government is introducing an employer contribution. This will see employers contribute 10 per cent of employees’ wages for hours not worked in July, with this then increased to 20 per cent in August and September.
If you’re looking for information or advice on any of the further announcements made during today’s Budget, you can find more information on the Gov.uk website here.