What the Spring Budget 2021 means for freelancers and small businesses
Now the dust has settled and a lot of the detail has now been released, I thought we’d take a closer look at what was announced in the Chancellor’s spring budget. I’m just going to be looking at things specifically related to small businesses here, but the full budget can be found on the Government website.
Extension to the furlough scheme
Originally due to end at the end March, this has now been extended until the end of September. Until July the scheme runs in much the same way as it has been since last year, but those who changed jobs in October/November and just missed out on being eligible are now able to be furloughed.
Up until the end of April employees must have been an on a payroll submission to HMRC as at 30th October 2020. But from 1st May staff can be furloughed if they were employed on 2nd March 2021 AND had been on at least one payroll submission between 20th March 2020 and 2nd March 2021.
You don’t need to have made a previous claim for an employee in order to furlough them from 1st May.
There was no mention, though, of the £1,000 bonus that employers had originally been told would be paid in January for those employees they’d retained. It’s on pause at the moment, but it’s currently unclear whether this will paid once the furlough scheme ends.
We already knew about the 4th grant, covering February to April, but what was new was that it would include the 2019/20 tax year. This means that around 600,000 more people are now potentially eligible, which is great news for those who became self-employed in the year before the pandemic hit.
As with the first three grants, the 4th one will be 80% of average profits of the last 3 years (now including 19/20) and capped at £7,500. Applications are due to open in late April, with HMRC contacting those eligible in mid-April to give them an application date. The closing date for applications will be 31st May.
The big news was of a 5th, and supposedly final, grant. Applications are expected to open in late July. The amounts for this one are a bit more complicated and the earlier ones, as it depends on how big a hit your turnover (sales) has taken. Details haven’t been released yet as to exactly how this will be measured or what evidence will be required, but for those who have seen their sales down by more than 30% will get 80% of average trading profits, capped at £7,500. Those whose sales have fallen, but by less than 30%, however will received just 30% of average trading profits, capped at £2,850.
Corporation tax increase
It had been widely leaked in the run up to the budget, and sure enough we saw a planned increase in corporation tax from 19% to 25%. This will take effect from April 2023, so won’t immediately hit businesses recovering from closures and reduced trade.
There was an added bonus, too. Those will profits under £50,000 will continue to pay 19% and it will gradually increase in line with profits, with only those with profits over £250,000 paying the full 25%.
As ever with budgets, there were winner and losers. I think on balance it was probably about the best we could hope for, although I would have loved to have seen support for the many businesses who have been excluded from financial help since last March. Many of these have had very little, if any, income in the past year and there’s a real risk that we’re going to lose a lot of great businesses as a result.