Chancellor Rishi Sunak presented his long-awaited second Budget on Wednesday 3 March 2021, focusing mainly on three key areas:
emergency support packages to businesses, employees, and the public. Please find below a summary of the Budget announcements
that concern businesses.
Corporation Tax
From April 2023, companies with a profit of over £250,000 will be charged corporation tax at 25%. Those with profits below £50,000 will continue to be charged the current rate of 19%. The companies with a profit between £50,000 to £250,000 will be charged with a tapered rate. The Diverted Profits Tax rate will rise to 31% from April 2023.
The Chancellor announced a new “super-deduction” which will allow companies to cut their tax bill from 1 April 2021 to 31 March 2023 by up to 25p for every £1 they invest in qualifying new plant and machinery assets.
The normal business loss carry-back rules will be extended from one year to three years for losses of up to £2 m for the next 2 years. The loss carry-back describes a situation where a business experiences a net operating loss and chooses to apply that loss to a prior year’s tax return. Therefore, struggling companies can claim refunds of corporation tax paid in earlier periods.
Value-added tax (VAT)
The current VAT thresholds for registration and deregistration (£85,000 and £83,000 respectively) will be maintained until 31 March 2024.
As a result of Covid-19, businesses that had the option to defer their VAT liabilities from 20 March 2020 through to the end of 30 June 2020 can now opt-in to use the VAT Deferral New Payment Scheme. That will allow businesses to pay that deferred VAT in up to 11 equal monthly interest-free instalments rather than one larger payment due by 31 March 2021.
Coronavirus Job Retention Scheme (CJRS)
Coronavirus Job Retention Scheme (CJRS) has been extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked. No employer contributions are required (apart from National Insurance contributions and pensions) between April to June. From July, employers will be required to contribute towards the cost of unworked hours. That will be 10% in July, 20% in August, and 20% in September.
Small and medium-sized enterprises (SMEs) across the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay costs per employee. This scheme is a temporary Covid-19 measure intended to support employers while levels of sickness absence are high.
Help to Grow Scheme
The help to grow scheme includes two sides: management and digital. The management side involves a 12-week programme delivered by leading business schools in the UK to develop small business leaders and enhance their strategic skills. Learn more about the details here.
The second side of the scheme focuses on digital support for small businesses. The support is offered through a new platform that provides free advice on how small businesses can boost their performance with technology. Additionally, the companies who meet the criteria will be able to get up to a 50% discount on the costs of approved software in the total worth of up to £5000. More information can be found here.
Eight New UK Freeports to be Set Up
The Budget announced that eight new freeports are to be set up in the following areas: East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City region, Plymouth, Solent, Thames, and Teesside.
The freeport zones mean designated areas recognised in law where businesses will benefit from tax reliefs, customs benefits, simpler planning, and wider government support. Therefore, the standard tax rules of the country do not apply in these areas.
The UK Budget for 2021 Aims for Businesses to Thrive
Several support schemes for Covid-19 effects have been extended, providing a safety net for businesses to the autumn. The “super-deduction” is also a good government incentive for companies to invest in new plants and machinery over the next two years.
Therefore, the Spring Budget 2021 shows the government’s support for companies experiencing effects from the Covid-19 crisis, and the aspiration for businesses to thrive.
Opening a business in the UK in my1Office is easy. You will be carried through the process with step-by-step instructions to ensure the application details will be correct. Learn more about the service here.
