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Budget 2021: Protecting your Business and How SME Insurance Helps

In the March 2021 UK budget, Chancellor Rishi Sunak announced a number of support measures to help keep businesses in business. Some specific initiatives to help SMEs include extended furlough support, a new 'restart' grant scheme, further SEISS grants for the self-employed and an extension to the business rates holiday.

Furlough scheme extended to September 2021

For those businesses that employ staff, The Coronovirus Job Retention Scheme (CJRS) - commonly referred to as 'furlough' - has been extended until September 2021. The scheme, which was first introduced in March 2020 to help protect jobs on a short-term basis, and has been a lifeline for small businesses.

SMEs will continue to receive 80% towards staff wages from the government until June and then the amount is tapered with employers having to contribute 10% in July and 20% in August and September towards staff wages.

Self-Employment Income Support Scheme (SEISS) grants

A fourth and fifth grant for the self employed was announced with wider eligibility than before. It is envisaged that another 600,000 newly self-employed will now qualify as long as they submitted their 2019-20 tax return by midnight on 2nd March 2021.

Applications for the fourth grant can be made in April through the government’s website to cover the period February to April. As before, workers who meet the criteria can claim 80 per cent of average monthly profits capped at £2,500.

For the fifth grant, the criteria are being tightened and the full 80% grant will only be given to people whose turnover has fallen by 30% or more.

Restart grants for businesses to launch in April 2021

The new Restart Grant scheme will start in April, with £5billion of grant funding being made available to businesses in England. It aims to help businesses reopen after lockdown. Around 700,000 businesses will be eligible for the grant including retail, hospitality, accommodation, leisure and personal care sectors.

Non-essential shops will be the first to open in April and they can get grants up to £6,000.

Hospitality will be next to reopen and pubs, restaurants, gyms and salons will be able to claim up to £18,000.

Full details on how to apply and eligibility have yet to be published, but will be available on your business location's local government website.

The Recovery Loan Scheme

A new scheme known as The Recovery Loan Scheme will replace the Bounce Back Loan and Business Interruption Loans so that businesses of all sizes can continue to have access to loans and finance up to £10 million per business once the existing Covid-19 loan schemes close.

The scheme launches on 6 April 2021 and is open until 31 December 2021, providing support as businesses recover and grow following the disruption of the pandemic subject to review. 

Corporation tax breaks for SMEs with profits under £50,000

Whilst Sunak announced that corporation tax will increase to 25% in 2023, this will not affect companies that make profits of £50,000/year or less. The rate will remain at the 'small profits rate' of 19% for these smaller businesses. This means that around 70% of companies – 1.4 million businesses – will be unaffected.

Corporation tax will be tapered above £50,000 profits so that the full 25% tax increase will only apply to businesses who earn £250,000 or more.

VAT and Business Rate help for hospitality and leisure businesses

One of the measures introduced last year to help the hospitality sector which was badly affected by the pandemic, was an exemption from paying business rates.

This holiday was due to end at the end of March, but good news is this exemption has now been extended until the end of June 2021. After that there will be a discount of one third of the normal charge for the rest of the financial year, up to a maximum of £2 million for closed businesses.

The VAT discount to 5% for food and drink sold in pubs and restaurants will last until the end of September 2021. After that it will increase to 12.5% - which is still below the normal rate of 20% - for a further six months. This will be a further boost to the 150,000 hospitality and tourism businesses in the UK, employing 2.4 million people.

SME management training to boost productivity

As part of the government’s 'Help to Grow' plan, the Chancellor also announced a government-backed management training programme to help boost productivity, efficiency and digital skills. Open to 130,000 small businesses, this 12-week online management programme will be open from June with 30,000 places available over three years. To be eligible, small businesses need to have between five and 249 employees and have been in business for more than a year. The government covers most of the cost with businesses being charged £750.

Temporary super tax deduction

From 1 April 2021 until 31 March 2023, a new super tax deduction will come into effect for businesses investing into 'qualifying' new plant and machinery. Launched to encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now, This super deduction initiative will enable companies to cut their tax bill by up to 25p for every £1 they invest.

It is believed that the super deductions will propel Britain's capital allowances system (where businesses pay lower tax depending on the assets purchased) to be one of the most competitive in the world. 

Manufacturing and construction companies are likely to benefit most from the super deduction as they regularly need to spend significant amounts on purchasing or hiring-in new equipment and machinery. Fuller details on the scope for the super deduction are still to be specified.

Other aspects of the 2021 budget for businesses

  • No increase in overall tax rates for VAT, National Insurance or Income tax
  • Increase in minimum wage from 6 April 2021 to £8.91
  • Fuel duty frozen

The budget represents some positive news for small businesses as the country emerges out of lockdown.

Business insurance from Towergate

Whatever type of business you run, make sure you are protected. Whether you’re a large business, SME or sole trader, work from home or have a property empire - Towergate have got an insurance policy for you. 

Towergate is one of the leading insurance intermediaries in the UK and provide a specialist range of business insurance policies including SME liability insurance products. Our team of dedicated advisers are highly trained and will handle your enquiries confidentially, We offer suitably priced products from a range of carefully selected insurers.

For more information, visit our dedicated business insurance page or see our cover for a range of trades.

About the author

Alison Wild Bcom Hons MAAT MATT Taxation Technician Commercial Tax Pensions Insurance And Marketing Specialist AuthorAlison Wild BCom (Hons), MAAT, ATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (AAT) and also has considerable experience as a residential landlord.

This is a marketing article by Towergate Insurance.

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