Budget 2021 for growth companies

A quick round up of some excellent analyses of the 2021 Budget that focus on growth companies

Part of me thinks that there is no need for another opinion piece on the 2021 Budget, and many details are yet to emerge and may change. The official government summary is the safest to rely upon, but heavy on adjectives and light on “useful details” so far

State of the economy and public finances

  • UK economy forecast to return to pre-Covid levels by middle of 2022

  • Annual growth set to rebound by 4% this year, followed by 7.3% growth in 2022

  • Unemployment expected to peak at 6.5% next year, lower than 11.9% previously predicted

  • UK to borrow a peacetime record of £355bn this year.

  • UK Borrowing will total £234bn in 2021-22

  • Debt as a share of GDP to fall from 4.5% next year to 3.5% in 2022-23

Coronavirus support

  • Furlough support extended until end September

  • Government to continue paying 80% of employees’ wages for hours they cannot work

  • Employers to be asked to contribute 10% in July and 20% in August and September

  • 600,000 more self-employed people will be eligible for help as access to grants is widened

  • £20 uplift in Universal Credit to be extended for another six months

  • Minimum wage to increase to £8.91 an hour from April.

Personal Taxation

  • No changes to rates of income tax, national insurance or VAT

  • Personal income tax allowance to be frozen at £12,570 from 2022 to 2026

  • Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026

  • The stamp duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June and after that there will still be no duty on homes worth up to £250,000 for another three months. After that the threshold returns to the usual level of £125,000 from October

  • Mr Sunak confirms that the government will guarantee 95% mortgages to help those who can only afford a 5% deposit

  • Planned increases in duties on beer, cider, spirits and wine - as well as fuel - will be cancelled

Company Taxation

  • Corporation tax on company profits to rise from 19% to 25% in April 2023 but Corporation tax rate to be kept at 19% for about 1.5 million smaller companies

  • Companies will be able to offset losses against their tax bills going back up to three years, allowing them to claim additional refunds of up to £760,000

  • There will be a review of the current 8% bank surcharge to make sure they do not have to pay too much and that the sector "remains internationally competitive"

  • A "super-deduction" to incentivise business investment will mean they can reduce their taxable income by 130% of the amount they invest

Business, digital and science

  • Incentive grants for apprenticeships to rise to £3,000 and £126 for traineeships

  • A "help to grow" scheme will offer smaller businesses management and digital training

  • VAT cut for hospitality firms to be maintained at 5% until September

  • Interim 12.5% rate to apply for the following six months

  • Business rates holiday for firms in England will continue from April until June

  • Reduced rate of 5% VAT for the hospitality and tourism sectors has been extended to the end of September, and will only go up to 12.5% after that, before returning to 20% next April

  • £5bn in re-opening grants for non-essential businesses of up to £6,000 per premises.

  • The first ever UK Infrastructure Bank will be set up, in Leeds, with an initial capitalisation of £12bn - to finance public and private sector "green industrial revolution" projects

  • Eight freeports - special economic zones with different rules to make it cheaper and easier to do businesses - have been announced at: East Midlands airport; Felixstowe and Harwich; Humber; Liverpool city region; Plymouth; Solent; Thames; and Teesside

  • Visa reforms are being introduced to make it easier to attract the "best and most promising international talent" in science, research and tech

  • Rules will also be changed to allow pension funds to plough billions into innovative new ventures and, in line with a review by Lord Hill, to encourage more companies to float in London

  • Consumers will be able to put their money into a new savings product to support green projects

  • A new group will be set up to position the City as the global leader for carbon offset markets

  • The Bank of England's remit will be updated "to reflect the importance of environmental sustainability and the transition to net zero" as well as the 2% inflation target

Health and education

  • £19m for domestic violence programmes, funding network of respite rooms

  • £40m of funding for Thalidomide victims and lifetime support guarantee

The arts and sport

  • £400m to help arts venues in England, including museums and galleries, re-open

  • £300m recovery package for professional sport and £25m for grassroots football

  • A total of £700m will go on supporting arts, culture and sports as they reopen

  • A £150m fund will help communities take ownership of pubs, theatres, shops or local sports clubs at risk of being lost

Again, details are currently very sparse and will not emerge for a couple of weeks yet. This should give us all enough time to lobby and enquire.

Had enough yet?

For those who are keen to explore further its impact on startups and innovators, here are my “must read” reactions from people in the sectors:

UK Tech News

Majors on the visas for talent and the extended tax breaks

Edie dot Net

Majors on green recovery fund and net zero

Information Age

Majors on FinTech and the needs for other enabling factors to come online

ICAEW

As ever, the ICAEW presents a very balanced and professional summary on it public facing website

ICAEW Chief Executive Michael Izza has called measures announced by the Chancellor in his March 2021 Budget to protect jobs and livelihoods an “effective bridge” to enable companies to plan effectively over the next six months.

In his much-anticipated ‘Bounceback Budget’, Rishi Sunak unveiled a package of support including extensions to the two major income support schemes, alongside extensions of universal credit, tax credits and stamp duty land tax. Support for business including restart grants, an extension of business rate relief, loss relief carry backs being extended to three years and reduced VAT rates for the hospitality sector.

Speaking after the Budget speech, Izza said that longer-term incentives for investment such as the super deduction will help to make the UK competitive in the post-crisis global economy, perhaps offsetting the effect of the planned increase in corporation tax. 

However, he warned that the impact of COVID-19 will be with us for a decade. “We previously heard that recovery will come from consumers spending the savings they have accumulated during the lockdowns, but there wasn’t much in the Budget to kickstart this,” said Izza.

Action points

My advice is to ensure you are not planning to let the “tax tail wag the business dog”, while also ensuring that you have reviewed and applied for all relevant grants, reliefs, tax breaks and advantages.

Obviously, we are happy to help with that.