This year’s budget announcement was certainly up there with some of the most eagerly-anticipated budgets in UK history.
It brought big declarations and a promise of further support for businesses.
How will you be affected?
Have you had chance to consider the impacts and opportunities each of these new changes will bring to your company?
Here’s our round-up of the key takeaways for businesses…
1. The ‘Super Deduction’ – upfront capital allowances
Described by Chancellor, Rishi Sunak as “the biggest tax cut in modern British history”, the ‘Super Deduction’ means a company will be able to claim 130% upfront capital allowances (as a deduction from its tax bill) for investment in qualifying plant and machinery.
The idea behind the two-year Super Deduction, which will run from 1st April 2021- 31st March 2023, is to support the UK’s long-term economic recovery, encouraging investment and spending now, rather than waiting and delaying.
How does this work in practice?
As an example, if your company invests £1m of expenditure in qualifying plant and machinery, you could claim £1.3m (130% of your investment) from your company’s taxable profits through the new ‘Super Deduction’.
What does plant and machinery include?
You’ll be surprised at what’s covered within ‘plant and machinery’ – read the government’s guide here for full eligibility criteria – but, the kinds of assets that may qualify for either Super Deduction or other Capital Allowances are:
solar panels, computer equipment and servers, tractors, lorries, vans, ladders, drills, cranes, office chairs and desks, electric vehicle charge points, refrigeration units, compressors, foundry equipment.
2. Business Rates holiday extension
The update also confirmed that the 100% business rates holiday will be extended for eligible businesses in retail, hospital and leisure for a further three months until 30th June 2021(check your eligibility).
This will be followed by 66% business rate relief from 1st July 2021- 31st March 2022 (capped at £2m per business for properties that were required to be closed on 5th January 2021or £105,000 per business as other eligible properties).
3. Corporation Tax increase in 2023
On to a less popular update that dominated the headlines…corporation tax will be increasing in April 2023.
While many feel this increase is a stark one (rising from the 19% current rate to 25% in two years’ time), it’s important to consider some of the mitigating factors:
- First, the two-year Super Deduction tax break has been designed to help businesses invest and strengthen their position before any rises come in, so, many companies will be able to take advantage of this
- Small businesses will be exempt from the increase, meaning businesses with profits of £50,000 or less will continue to be taxed at 19% (according to gov.uk that’s around 70% of actively trading companies)
- The increase will be tapered, with an upper threshold of £250,000, so only businesses with profits of £250,000 or greater will be taxed the full 25% (details of the various thresholds between £50,000 – £250,000 have not been published yet)
4. Extension of the furlough scheme
The Chancellor announced an extension of the Coronavirus Job Retention Scheme (better known as the furlough scheme) for all sectors until 30th September 2021.
Employer contributions will gradually increase from 1st July 2021, as the scheme begins to taper down. In July, employers will contribute 10% with the government contributing 70% and in August and September, employers will contribute 20% with the government contributing 60%.
5. Support through new grants and schemes
The government also announced a number of new grants, loans and initiatives available for businesses, including:
- Restart grants to help business to re-open (grants of up to £6,000 for non-essential retail premises and up to £18,000 for hospitality businesses and gyms from this April)
- Recovery loans (which will replace the Bounce-Back loan scheme) that will be open to all businesses offering amounts between £25,000 – £10m
- A ‘Help to grow: management and digital’ scheme, whereby the government will pay 90% of the cost for management and digital skills training, plus give a 50% discount on productivity-enhancing software
- A doubled incentive payment of £3,000 for every new apprentice hired between 1 April and 30 September 2021
We hope this has been a useful summary of some of the key points from the budget.
Talk to us about your commercial property
If you’re looking to reassess your property plans based on these upcoming changes and would like some advice from our team about your individual circumstances, get in touch today.