7 key takeaways for SMEs from the 2021 budget

Amid much anticipation, the Chancellor outlined a new budget on 3rd March 2021, with a focus on continued support for businesses as we start on the path to ease lockdown restrictions. Here, we look at 7 of the key takeaways from the budget announcement and how these will affect small businesses in the months ahead.

1. Coronavirus Job Retention Scheme (Furlough) will be extended

As the main focus of the budget was continuing the support for businesses, it was no surprise that the Coronavirus Job Retention Scheme, or furlough, has been extended to 30th September 2021. However, as the scheme progresses, the support will gradually be tapered to coincide with the greater easing of restrictions.

By July, if you still have employees on furlough, you’ll need to contribute 10% towards the hours their staff don’t work. That will then increase to 20% in August and September, as eased restrictions allow businesses to start to resume trading.

2. New Government business loan scheme will replace CBILS and BBLS

Though the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) have been lifelines to businesses throughout the pandemic, the end of March brings with it the final chance to apply for these schemes. Alongside the Coronavirus Large Business Interruption Loan Scheme (CLBILS), they will officially close for applications on 31st March 2021 with no further extension, so if you want to apply for any of these three schemes, you’ll want to do this before the deadline.

To replace this, a new Government loan scheme will be launched. The new Recovery Loan Scheme (RLS) will run until 31st December 2021, but this date will be left under review.

The scheme will offer loans from £25,001 to £10 million, dependent on the provider, and there won’t be any turnover restrictions for you to access the scheme. If you have a previous CBILS, BBLS or CLBILS loan, you’ll be able to access the new scheme, however the maximum you’ll be able to borrow will depend on the provider’s assessment and scheme requirements.

Credit checks will be required for all applications, however providers may overlook concerns over any short-to-medium term performance caused by the pandemic.

To learn more about the new scheme, you can find a full breakdown on the differences between CBILS and the Recovery Loan Scheme here.

3. Self-Employed Income Support Scheme (SEISS) has been expanded

In line with his promise to continue support as we slowly start to ease restrictions, the Chancellor announced a fifth grant for the Self-Employed Income Support Scheme (SEISS), which will cover June, July and August. However, this new fifth grant will be even more targeted:

• Those whose turnover has fallen by more than 30% will still be eligible for 80% of their average monthly profits, up to £7,500
• Those who haven’t been as affected will be eligible for a grant worth 30% of their average monthly profits

In addition, the eligibility for this fifth grant is wider than previous ones. Anyone who has submitted a 2019-20 tax return by midnight on 3rd March 2021 will now be eligible for the grant, which means if you were newly self-employed at the beginning of the pandemic, you’ll now be able to apply for grants.

4. Corporation tax will increase to 25% in 2023

While the budget brought news of continued support, the Chancellor did stress how important it was to begin paying back. One such step was the choice to raise the rate of corporation tax paid on business profits to 25% — but there are some protections in that announcement:

• It won’t be introduced until April 2023
• If you have profits of £50,000 or less, you’ll continue to pay the current 19% rate
• The rate will be tapered up depending on a business’ profits — only businesses that have profits of more than £250,000 will pay the full 25%

According to the Chancellor, this means that only 10% of all businesses should pay the new 25% rate.

5. Business rates holiday and 5% VAT rate will be extended

To add to the further extensions of business support, the Chancellor also confirmed that the business rates holiday that has been crucial to helping businesses manage the impact of the pandemic will be extended until 30th June 2021. After this, business rates will be discounted instead.

In addition, the 5% VAT rate for businesses in the hospitality and tourism sectors will also continue until 30th September 2021. After that date, it will increase to 12.5%, before returning to 20% in April 2022.

6. ‘Restart’ grants to help businesses reopen announced

The High Street has found the impact of the pandemic particularly difficult to manage, so the Chancellor also announced a series of ‘restart’ grants totalling £5 billion to help these businesses reopen after lockdown ends. Around 700,000 businesses will be eligible for these grants, including shops, salons, gyms and restaurants.

As non-essential retail businesses will be able to reopen earlier, these grants will be worth up to £6,000. By contrast, as hospitality will open later, businesses in this sector could receive grants up to £18,000.

The new ‘restart’ grants will be paid to you directly by your local authority from April 2021, and this will replace any current monthly grant you’re currently receiving.It’s important to note the ‘restart’ grants are only available to businesses in England.

7. New funding for communities to take over pubs in danger of closing

As pubs and hospitality has been hardest hit by the pandemic, the Chancellor announced the new Community Ownership Fund to help assist these businesses, worth £150 million. If you happen to own a venue that’s in danger of shutting down, or want to save a venue in your community, this money will allow local communities to help save it from closure.

The scheme will last for four years and is UK-wide. It allows communities to bid up to £250,000 to save a nearby pub or social club and the Government will match the money raised.

It’s important to remember that when taking a loan, your business is liable for the full loan amount. The CBIL and BBL schemes provide a guarantee to the lender, not to the business.

All information is correct at time of publishing. While we want to help as much as we can, the information and documents found here are provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here.If you have any questions, please speak to your professional adviser or seek independent legal advice.

CBILS and BBLS are managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business, Energy & Industrial Strategy. British Business Bank plc is a development bank wholly owned by HM Government. They are not authorised or regulated by the PRA or the FCA. Visit british-business-bank.co.uk