Simple guide to the March 2021 Budget for small businesses

Mar 10, 2021

On March 3rd, 2021, Chancellor Rishi Sunak delivered his second Budget after a historic year in which the UK Gross Domestic Product fell by roughly 10%.

The following are the highlights of the Budget that affect small company owners and self-employed people.


What support will be available for Business effected by COVID-19?

The government said that current measures will be extended, as well as some new ones, to assist the economy cope with the coronavirus outbreak.


Will the furlough programme be extended?

The Chancellor announced the continuation of the furlough programme (Coronavirus Job Retention Scheme or ‘CJRS’) to the end of September 2021 in advance of the budget. Furloughed employees will continue to receive 80% of their regular compensation for the hours they are not working.

The assistance will come in the form of a grant to their employers. Employers will be required to contribute 10% of a worker’s income for unworked hours in July, and 20% of a worker’s pay in August and September. The grant’s £2,500 monthly cap remains in place.


Will newly self-employed people be supported by the Employed Income Support Plan (SEISS)?

Individuals who started self-employment in the 2019/20 tax year, as well as those who have previously claimed, will be eligible for the fourth grant under the SEISS scheme.

Individuals who qualify for the fourth round of SEISS will be able to claim up to 80% of their average trading gains for three months, with a cap of £7,500. In April, you can apply for the fourth award. A fifth award will be offered in May, June, and July, and it will most likely remain accessible throughout the summer. You will receive the entire 80 percent award if your turnover has decreased by 30% or more.

To be eligible for the fourth grant, you must have submitted a Self Assessment tax return for the 2019/20 tax year by midnight on March 2, 2021, if you are a new entrant to the scheme. All other qualifying requirements will be the same as they were for the third grant. In due course, further information will be released.

Previous grants involved a taxable grant of 80% of average monthly trade earnings, paid out in a single payment covering three months’ worth of earnings, and capped at £7,500 in total (applications for the third award ended on January 29, 2021).


Recovery Loan Scheme

The Recovery Loan Scheme will provide lenders with a 80 % guarantee on eligible loans between £25,000 and £10 million starting April 6, 2021. All firms, including those who have already received help via the existing COVID-19 guaranteed loan schemes, will be eligible to participate in the scheme.


Will there be Restart Grants to help businesses reopen in England?

New ‘Restart Grants’ to help businesses in England reopen when lockdown begins to ease from April 2021 were announced:

  • Non-essential retail businesses will receive grants up to £6,000 per premises.
  • Hospitality and leisure, including personal care and gyms, which are more impacted by restrictions and may not open until later in the year, can each receive grants of up to £18,000.

Measures to help businesses reopen across the rest of the UK are expected to be announced in due course by the relevant devolved administrations.

Is Corporation Tax going to increase?

For business profits up to £50,000, the Corporation Tax rate will remain at 19%, with a gradual increase to a main rate of 25% for income exceeding £250,000 beginning in April 2023.


Will the VAT reduction for some remain?

The VAT cut to 5% will remain in place until the end of September for the hospitality and tourism industries. It will then rise to 12.5% for another six months before returning to the full 20% rate in April 2022. No other changes are being made to VAT.

The VAT registration threshold for firms will continue at £85,000 until March 31, 2024, when it will be reconsidered.


Capital Gains Tax

The Capital Gains Tax annual exempt amount remains at £12,300 and will be maintained at that level up to 2026.

National Minimum Wage

The government confirmed that the National Minimum Wage would rise to £8.91 per hour.


Pensions Lifetime Allowance

The pension’s lifetime allowance remains at £1,073,100 and will be maintained at that level up to 2026.


Personal Savings

The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2021-22.

The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.