Budget 2021 – Key Highlights for Self-Employed and Companies

Here is a rundown of all the key aspects included within the 2021 Budget that will have an impact on those of you who are Self-Employed or Company Owners. All points may not be applicable to you personally so I’ve listed each section under their own headings so you can get a quick idea as to whether or not that section will be relevant to you. Enjoy!

Self-Employment Income Support Scheme Extended

Support for the Self-Employed will also continue until September with a 4th grant covering the period February to April and a 5th and final grant from May onwards.

The 4th grant will provide 3 months of support at 80% of average trading profits.
For the 5th grant, people will continue to receive grants of 3 months average profit with a system open to claims from late July. There’s no mention of what percentage this will be yet.
For the 5th grant, People’s who’s turnover has reduced by 30% or more, will continue to receive the full 80% grant. People’s who’s turnover has fallen by less than 30% will receive 30% grant.

Self-Employment Income Support Scheme for Newly Self-Employed

A major improvement in access to self-employed scheme has become available. When the scheme was launched in 2020, the newly self-employed couldn’t qualify because they hadn’t filed the 2019 – 2020 tax return, but as the tax return deadline has now passed, as long as the individual has filed their 2019 – 2020 tax return, can now claim the 4th and 5th grants.

No Raise on Income Tax, National Insurance or VAT

The government isn’t going to raise the rate the rate of income tax, national insurance or VAT. Instead there will be a freeze on personal tax thresholds. However there will increase next to £12,570 and will be kept until April 2026. The higher rate threshold will be increased next year to £50,270 and will then also remain at that level until April 2026.

Nobody’s take-home pay will be less than it is now.

Furlough Scheme Extension

Furlough scheme will be extended until the end of September. For employees there will be no change to the terms they will continue to receive 80% of their salary for ours not worked until the scheme ends. As businesses reopen they will asked to contribute alongside the taxpayer the cost of paying their employees, nothing will change until July, when the contribution required will be 10% an 20% in August and September.

Corporation Tax Rates

In April 2023 the rate of corporation tax, paid on company profits, will increase to 25% but only for companies with profits over £250,000.

Company profits of £50,000 or less will be maintained at the current rate of 19% Corporation Tax which is being introduced as a ‘small profits rate’.

It’s not yet clear as to how much corporation tax will be for profits between £50,000 and £250,000 but they do confirm it will be ‘tapered’.

National Living Wage Increase

Increase of national living wage to £8.91 from April 2021, an annual pay rise of £350 for a full-time employee living on the national living wage.

Apprenticeship Incentive Increase

Paying businesses more to hire apprentices, doubling incentive payments to £3,000 for all new apprentice hires of any age.

Support for Low-Income Households Extended

Support for low-income households, universal credit uplift of £20 per week will continue for a further 6 months. Providing working tax credits with equivalent support for the next 6 months. This will be a one-off payment of £500.

Cash Grants

Current cash grants will end in March but a new restart grant will start in April.

Non-essential retail businesses will receive grants of £6,000 per premises.
Hospitality and leisure businesses, including personal care and gyms, will receive grants of up to £18,000.

Company Losses

Companies can carry back losses of up £2million for 3 years, meaning companies can now claim additional tax refunds of up to £760,000.

Business Loans

Bounce Back Loan and CBILS are now coming to an end, so the government are introducing a new recovery loan scheme to take their place.

Businesses of any size can apply for loans from £25,000 up to £10million through to the end of 2021. The government will provide a guarantee to lenders of 80%.

Business Rates Holiday Extended

The 100% businesses rate holiday will continue for all eligible business in retail, hospitality and leisure sectors through to the end of June 2021. For the remaining 9 months of the year, business rates will still be discounted by two-thirds, up to a value of £2million for closed businesses, with lower cap for those who have been able to stay open.

Training for Small and Medium Sized Businesses

New set of UK-wide schemes ‘help to grow management’ will help tens of thousands of small and medium sized businesses get world-class management training. Dozens of business schools across the UK will offer a new executive development programme with mentoring and peer learning. The government will contribute 95% of the total cost.

‘Help to grow digital’ will help small business develop digital skills by giving them free expert training and a 50% discount on new productivity enhancing software, worth up to £5,000 each.

Both programs will commence by Autumn 2021 and you can register your interest now at – https://helptogrow.campaign.gov.uk/

Hospitality and Tourism Reduced VAT Rate Extended

The 5% reduced rate of VAT will be extended to the 30th September 2021 for Hospitality and Tourism businesses. Once that time is reached, the 20% VAT will not be reintroduced, instead there will be an interim rate of 12.5% for another 6 months. The standard rate won’t return until April 2022.

Housing Market – Stamp Duty & Deposits

The £500,000 nil-rate band has now been extended and will end on the 30th June 2021. The nil-rate band will then be reduced to £250,000, until September 2021, when it returns to the original band of £125,000 from October 1st 2021.

5% house deposits will be back from April 2021 with a new ‘Mortgage Guarantee’ policy will being introduced. Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a government guarantee on those mortgages. Many major high-street banks have confirmed they will be accepting these 95% mortgages from April 2021.

Tax Thresholds

The inheritance tax threshold, the pensions lifetime allowance, the annual exempt amount in capital gains tax will remain the same until April 2026.

From April 2022, for 2 years, the VAT registration threshold of £85,000, will remain.

Investment Percentage

Introduction of the ‘Super Deduction’ for the next 2 years will allow companies to reduce their tax bill by 130% of any investment cost. So any purchase that is deemed an investment now comes with an additional 30% of the cost!