How Will Your Small Business Be Affected by the UK Budget Summary for 2021? - Your Accounting Team

June 19, 2021by CBM Accounting0

Budget 2021 coverage—everything you ought to know on a pivotal day for UK small businesses.

We will keep you updated on this crucial day for UK small businesses, and we will tell you how certain steps are helping the UK moderate the impact of the recent coronavirus lockdown and build the framework for the country’s economic resurgence.

The budget itself will be set to begin at 12:30 p.m. GMT, but first, we will go over everything we know thus far.

What can we anticipate from the Budget for 2021?

Many of the major budget announcements, such as an extension of the sabbatical scheme and a new incentives system, have been announced ahead of time, as is customary.

Modification of the furlough scheme:

The furlough scheme will almost certainly be maintained until September 2021, offering a vital lifeline for firms throughout the UK.

  • The government would cover 80% of salaries under the plan, with businesses anticipated to continue contributing later this year.
  • They will be required to pay 10% in July and 20% in August as the UK economy (presumably) continues to improve.

Support for self-employed:

The government will also take steps to assist the so-called omitted group of self-employed persons who were unable to receive financial assistance under Covid-19.

This was partly because applicants were required to file a 2018-2019 tax return, which means that not anybody who became self-employed after then could no longer receive cash payments under the self-employment income support scheme (SEISS).

Everyone who becomes self-employed during the 2019-2020 tax year (which concluded on 5 April 2020) would be eligible to apply, with the Budget expecting additional

6,00,000 self-employed persons to benefit.

Grants totaling £5 billion have been allocated to small businesses:

The chancellor will unveil an extra $5 billion in financial handouts to assist non-essential businesses to recover when the lockdown is lifted, in what is being described as a strategy to preserve the UK Street.

From April, qualifying businesses will be able to apply for a grant of up to $6, 6000 per site under the ‘’restart” awards initiative.

Hotels, gyms, hospitality facilities, personal care, and amusement businesses, among others, will be able to apply for up to $18,000 per destination.

Is there a rise in corporation tax?

The chancellor is generally likely to raise company tax from its existing level of 19 percent to recoup part of the billions spent battling Covid-19.

  • The United States allegedly intending to raise its similar tax from 21% to 28%.
  • Rates in Canada, France, Germany, Italy, and Japan are all above 25%.
  • Sunak has the potential to raise rates by up to 25%.

As a result, as he combines such a need to generate cash with helping UK firms, this is necessary to be completed incrementally.

Unfortunately, any rise will be a disaster for UK small companies fighting to stay afloat amid a historic economic recession.

Amendments towards the income tax:

Sunak’s capacity to generate cash has been severely limited as a result of one of the conservative party’s main electoral promises not to raise income tax, national insurance, or VAT.

As a result, the chancellor is allegedly intending to lock the income tax thresholds for 3 years in what has been dubbed a “stealth” tax increase.

Traditionally, these thresholds rise every year, but freezing them will lead to a rise in the number of persons in higher tax bands, who will pay more tax.

In comparison, suppose the existing personal allowance (the amount you may earn without paying income tax) was locked at $12,500 for three years. Then, in 2024, much more individuals will be paying income tax than in 2021, and the amount each person pays will rise since the amount earned tax-free does not rise in tandem with inflationary.

The bill may bring in $6bn in total.

Funding for Apprenticeship:

Sunak is anticipated to propose that firms would be paid $3,000 for each apprentice hired to promote the take-up of the UK’s apprenticeship system.

The payment will be made independently of the age of the apprentice, and the scheme will last until September 2021.

Employers will still be compensated $1,000 for new apprentices aged 16 to 18 (or under 25 with an education, health, and care plan), bringing the total to $4,000 per apprentice for select employers.

A “Flexi-apprenticeship” program will also be introduced, in which one apprentice will be distributed between numerous companies to accommodate industries with even more flexible/short-term working patterns.

Updates as they happen:

Budget 2021: The continuation of the furlough scheme has been confirmed:

Sunak’s first declaration, as widely predicted, is that the furlough scheme would be extended until the end of September 2021.

As previously stated, companies must maintain a 10% pay increase in July and a 20% wage increase in August.

Budget 2021: Income support for self-employed people has been expanded:

  • According to Sunak, self-employment assistance will be extended until September 2021.
  • A fourth award will be available for February and April.
  • Then, starting in May, a fifth and final award.

For such a fourth award, all qualified and self-employed individuals will get 80% of their average trade earnings for the previous three months (February, March, and April).

The amount paid for the fifth award, on the other hand, will be determined by how much the epidemic has harmed profits:

  • Those whose circulation has decreased by 30% upwards of will keep receiving the entire grant of 80%.
  • People whose turnover has decreased by less than 30% will get a 30% incentive.

Sunak also confirmed that self-employed persons would be entitled to the plan if they submitted a tax return for the 2019-2020 tax year by midnight tonight (2 March).

Over 600,000 more individuals should be self-employed because of this. From late July, the system will be open for submissions.

Budget 2021: Raise in the National Living Wage:

The chancellor proposes a small increase in the national living wage (legal minimum wage) from April 2021 to $8.91 per hour. Previously, the hourly wage was $8.72.

For someone working extra on the national living wage, Sunak estimates an average salary increase of about $350.

Budget 2021: Apprenticeship funding has been raised:

Another highly anticipated change has been confirmed, with the chancellor confirming that employers would henceforth be rewarded $3,000 per apprentice hired, regardless of the trainee’s age.

The Flexi-apprenticeships were not mentioned, although they may have been concealed in the minor print.

Budget 2021: Confirmation of a £5 billion grant scheme to help small businesses get lives back on track:

Sunak says that beginning in April; a new cash grant scheme will be accessible. The specifics are the same as those noted earlier:

  • A cash subsidy of up to £6,000 per premises would be accessible to non-retail companies.
  • A cash award of up to £18,000 per facility would be available to hospitality and leisure enterprises (including personal care and gyms).

Budget 2021: A new company loan scheme for recovery has been established:

Until the end of 2021, businesses of any size can apply for the loan ranging from £25,000 to £10 million.

In addition, like with preceding business loan schemes, the government would give an 80 percent assurance to lenders.

Budget 2021: Rates in the retail, hotel, and leisure industries vacation time has been increased:

The 100 percent corporation tax holiday for qualified retail, hotel, and leisure enterprises will be increased until the end of June, according to Sunak.

Business rates for qualifying businesses will be reduced by two-thirds for the remaining nine months of the financial year (with a maximum of £2 million for closed businesses and a reduced limit for those who have been allowed to stay open).

Budget 2021: The VAT reduction in the hospitality and tourist industries has been extended:

The Chancellor promises to continue to assist the hotel and tourist industries.

The existing low VAT rate of 5% will be maintained for another six months, until September 30, 2021.

Businesses in this industry will pay an interim VAT rate of 12.5 percent from September 2021 to April 2022. The rate will return to its previous level of 20% in April 2022.

Budget 2021: The income tax thresholds will stay intact:

Sunak’s tone has shifted significantly, as he highlights the role of fiscal responsibility to prevent public debt from spinning out of hand. To do so, the Treasury must raise funds.

The first news comes as little surprise, as Sunak affirms that the income tax limits would remain unchanged.

  • The personal allowance will rise to £12,570 in 2022.
  • It will meanwhile, remain at this level until April 2026.
  • The higher percentage threshold will rise to £50,270 in 2022.
  • It is expected to remain at this level through April 2026.

Budget 2021: Other tax thresholds have been frozen as well:

The inheritance tax levels, the lifetime allowance for pensions, and the yearly deductible amount in capital gains tax will all remain frozen until April 2026, according to Sunak.

The existing VAT registration threshold of £85,000 will remain unchanged until April 2024.

Budget 2021: Modifications in corporation taxes:

Sunak is now focusing on company tax, as predicted.

According to him, the company tax rate would rise from 19 percent to 25 percent starting in April 2023. He claims that this is reasonable considering the government’s support for businesses throughout the epidemic.

He asserts that the UK will still have the cheapest corporate tax rate in the G7 despite this adjustment (which comprises the UK, Canada, France, Germany, Italy, Japan, and the US).

He further highlights that corporate tax is only levied on earnings made by businesses.


For firms with an annual profit of £50,000 or less, there will be a new small profits rate of 19 percent (current rate) starting in April 2023.

According to Sunak, this indicates that around 70% of firms (1.4 million) will be unharmed by the move.

There will also be a reduction, with only firms with yearly profits of more than £250,000 paying the full 25% rate.

According to Sunak, this means that just 10% of businesses will pay the entire increased rate.

Businesses would now be authorized to carry over losses of up to £2 million for three years, allowing them to claim further tax refunds.

Budget 2021: To encourage business investment, a “super deduction” has been introduced:

Sunak declares that he wants to promote firms to invest so that the UK’s economy can revive. He does this by revealing the “super deduction.”

This scheme will be in place for the next two years, and it will allow businesses to deduct 130 percent of their expenditure from their tax burden.

Sunak appears to be alluding to capital allowances when he talks about a building company buying £10 million worth of building equipment.

This firm would be able to decrease its taxable income in the year they invest by £2.6 million under present regulations.

They may save £13 million by using the super deduction.

According to Sunak, the super deduction will be worth £25 billion over the next two years, making it the largest corporate tax reduction in modern British history.

Budget 2021: Duty on alcoholic beverages and petrol has been frozen:

All alcohol and gasoline charges will be frozen for the next financial year, according to the Chancellor.

Get in touch with us:

We provide a lot of useful information regarding budget summaries, which may help you understand how budget modifications influence your small business. Connect with CBM accounting to reach your company objectives and get information from our finance and accounting experts.


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Our locationsWhere to find us?
Get in touchCBM Accounting Ltd Social links
Taking seamless key performance indicators offline to maximise the long tail.

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