Budget 2021 – Business Taxes, New Grants and Support

Budget 2021 Business Taxes

Corporation tax rate rises, super deduction for qualifying assets, restart grants, new self-employment grants and extension of Furlough. The 3rd March 2021 budget for businesses was packed with many tax changes. Some good and some bad for businesses.

We go through the key announcements from the budget below. It includes how the budget will affect businesses, including Self-Employed and Limited Companies.

For information on how the budget 2021 will affect individuals see Budget 2021 – Personal Taxes.

Business Tax announcements in Budget 2021

Below are the main tax announcements for Companies and the Self-employed. Please note that some of the detail has yet to be released and therefore only summaries are provided. We will update this webpage as soon as the detail is available.

What is the new corporation tax rate?

The corporation tax rate is to remain at 19% for the next 2 years.

From 1st April 2023 the corporation tax rate will increase to 25% for companies with profits over £250,000. Companies with profits under £50,000 will still pay tax at 19% rate. As a result, it will mean that profits between £50,001 and £250,000 will be taxed at an effective tax rate of 26.5%.

Use our corporation tax calculator to see how the new rates will affect your business.

What is the plant and machinery super-deduction?

When businesses invest in qualifying assets, they can typically receive 100% tax relief. For example, paying £10,000 for plant and machinery will provide tax relief of £1,900 (based on tax rate of 19%).

For the next 2 years, commencing on 1st April 2021, the relief will be inflated to 130%. It is only available to Limited companies, the assets must be new and there are restrictions.

NOTE: This may seem like a tax giveaway, however when you consider the future tax rate increase this was essential. Capital expenditure now would save tax at 19% but delaying 2 years would save tax at 25% or even 26.5%. Without the super-deduction, the Government would be encouraging companies to delay investment.

What is the restart grant and who qualifies?

Restart grants will be provided for those businesses forced to close during the current lockdown.

A grant of up to £6,000 per premises will be provided for non-essential retail. Grants of up to £18,000 per premises will be provided for businesses in hospitality, accommodation, leisure, personal care and gyms.

The grants are linked to having business rates and will be paid by the local council. This is expected to be in April.

Who qualifies for the 4th self-employment grant?

A 4th self-employment grant will be paid in late April 2021. It is later than expected as HMRC have now extended the scheme to include 2019/20 tax returns. To qualify a tax return for 2019/20 must have been submitted by 2nd March 2021.

It is capped at £7,500 and is based on 80% of 3 months average profits for the last 4 years.

The Government expect that an additional 600,000 individuals will now qualify for this grant. The eligibility criteria will remain broadly the same as for the 3rd grant.

For more information see the HMRC website.

Has the job retention scheme been extended?

Yes. The Job retention scheme, also commonly known as furlough has been extended until the end of September 2021.

The Government support will continue to be 80% of employees usual hours not worked, capped at £2,500 per month. This will remain the same until the end of June 2021.

From July the Government will only support 70% and will expect employers to pay 10%. The support reduces further to 60% for August and September, with employers covering 20%.

See our monthly timeline showing the Furlough Scheme Extension changes.

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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