Budget 2021: What it means for SMEs

In his “investment-led” recovery plan, Rishi Sunak began by saying he’ll do “whatever it takes” at a time when 70,000 have lost their jobs, the economy has shrunk by 10% and borrowing is the highest it’s been since wartime. 

He went on to unveil a series of measures, many of which are designed to create jobs and stop businesses from going under during the Covid pandemic and in its aftermath. Let’s take a closer look at how the Budget is set to benefit the SME community.

1. Business rates holiday extended to June

The 100% business rates holiday will be extended through April to the end of June, Rishi Sunak has confirmed. For the remaining nine months of the financial year, business rates will be discounted by two thirds up to a value of £2m for closed businesses. 

SMEs that have been able to stay open during the pandemic will be subject to a lower cap. 

"Taking into account the significant support announced at Spending Review 2020, this means our total Covid support package, this year and next, is £352bn,” says Mr Sunak.

2. VAT reduction extended to September

The 5% reduced rate of VAT will continue until 30 September, after which a temporary 6-month rate of 12.5% will come into play. The standard VAT rate is set to return in April 2022. This, alongside the £20bn already provided, brings the Government’s total direct cash support to business to £25bn.

3. Furlough scheme extended to September 

Rishi Sunak has confirmed that the furlough scheme will continue until September. Businesses will be asked to contribute 10% in July and 20% in August and September. Employees will continue to receive 80% of their wages throughout these months. 

4. Self-employed support extended to September

Support for the self-employed will also continue until September, and a further 600,000 self-employed people will be eligible for help as access to grants is broadened. Under the new terms, those who filed their tax returns for 2019-20 by midnight on Tuesday 2 March are eligible.

The fourth SEISS grant will run from February until April and the fifth will cover May to September. You’ll be eligible for the 80% grant if you’re self-employed and your turnover has fallen by 30% or more. If your turnover has fallen by under 30%, you’ll get the 30% grant.

5. £5bn grant for retail, hospitality and leisure confirmed

A Restart Grant designed to "help businesses reopen and get going again" will be available in April. Non-essential retail businesses will be eligible for up to £6,000 per premises while hospitality and leisure businesses receive up to £18,000.

6. Business Recovery Loan Scheme outlined

The Recovery Loan Scheme is a follow-up to the existing COVID-19 loan scheme, ensuring that businesses can continue to access financial support as they recover and grow. 

Term loans and overdrafts of between £25,001 and £10 million per business are available, as are invoice finance and asset finance facilities of between £1,000 and £10 million per business. 

You can use the loan funds for any legitimate business purpose and there’s no turnover restriction for businesses accessing the scheme. Term loans and asset finance facilities are available for up to six years and overdrafts and invoice finance for up to three.

APPLY FOR A CBILS FACILITY

To provide lenders with confidence, the Government will guarantee 80% of the finance. The Recovery Loan Scheme is set to run from 6 April to 31 December 2021. Businesses will pay any interest and fees. As with CBILS loans, finance will only be available through accredited lenders. 

You’ll be able to access the Business Recovery Loan Scheme if you’ve taken out a CBILS, CLBILS or BBLS facility, and the maximum amount you can borrow will depend on the lender’s assessment and the scheme’s criteria. 

The Coronavirus Business Interruption Loan Scheme (CBILS) is currently open until 31 March 2021, so there’s still time to apply. 

7. Tax deduction for new equipment

From April 2021, business’ tax bill will be cut by 25p for each £1 it invests in new equipment. The super-deduction will be in effect for two years, making the scheme worth around £25 billion to UK companies. 

8. Funding for business growth announced

A new £520m Help to Grow scheme will provide up to 300,000 businesses with access to management training from some of the UK’s top business schools, advice on how to implement and use digital technology, and discounted software to boost productivity. 

9. Changes to corporation tax

Corporation tax will increase from 19% to 25% in April 2023, in line with the Chancellor’s plans to boost the economy after Covid. However, rates will remain at 19% for the 1.5 million smaller businesses with profits of less than £50,000.  

To improve cash flow, companies that experience trading losses in 2020/21 and/or 2021/22 will be able to carry back losses for up to three years, offsetting against taxable profits or net income. There will be no changes to income tax, national insurance or VAT rates.

10. Alcohol and fuel duties frozen

Pub and restaurant owners will be pleased to know that all alcohol duties will be frozen (as well as fuel duty). On the other hand, duty on cigarettes will go up by 2%, plus inflation.

11. Introduction of free ports

The Chancellor has announced that eight new freeports will begin operations from late 2021, in a bid to help regenerate parts of the UK. According to Mr Sunak, freeports have "different rules to make it easier and cheaper to do business".

Businesses operating within the new sites will also be able to access temporary tax breaks and reduced national insurance for new staff. Freeports are planned for the following areas:

• East Midlands Airport

• Felixstowe and Harwich

• Humber region

• Liverpool City Region

• Plymouth

• Solent

• Thames

• Teesside

12. Visas for access to international talent

Consultations have begun for a new visa scheme to allow startups and scaleups in tech and science to source the best talent from around the world. 

13. Kickstart scheme and lifetime skills guarantee

To boost skills training and employment, the Government is doubling incentive payments to £3,000 for all apprentice hires of any age for those hired between the 1 April to 30 September 2021. There will also be an additional £126m for traineeships in England.

A £7m fund will be available from July 2021 to “help employers in England set up and expand portable apprenticeships”. This will benefit people who need to work across multiple projects with different employers.

14. Funding for green UK infrastructure

Leeds will be home to the UK’s first ever green UK Infrastructure Bank, designed to “level up” the UK while helping it to reach net zero carbon emissions quicker. £12bn in capital will be made available to fund £40bn worth of public and private projects.

To fund and accelerate the goal of reaching net zero by 2050, £15bn in “green bonds” will be available to retail investors and other businesses.

Next steps: How can Funding Options help?

While the Budget contains some reassuring news for SMEs, we understand that many businesses require financial support now. From CBILS loans to other alternative business finance solutions, we’re here to help. 

We’ve been chosen by the government-owned British Business Bank as a designated platform to find finance for businesses, and have processed over £700M in CBILS loans for our customers so far. 

Even if you’re not eligible for CBILS finance or if your credit history is less-than-perfect, you might be able to access a different type of business finance. A few options include unsecured term loans, merchant cash advances and business credit cards.

Whatever your circumstances, see what you could be eligible for today.