How small firms should respond to the Chancellor’s new budget
Last week, the Chancellor delivered one of the most significant budgets in recent memory. Before the budget was released, the Government were keen to stress that some tax rises would be needed to help pay for the coronavirus response.
Many small firms will avoid one of the biggest tax hikes, but how should self-employed people, limited company directors and other small business owners be looking to respond to the budget? We’ll look at the most important changes and how they could affect your business below.
Corporation tax rise, but not for the nation’s smallest businesses
Corporation tax is a tax paid on company profits. Compared to many other nations, the 19% rate of corporation tax is currently very low in Britain.
To try and recover some of the money that the Treasury borrowed to finance the Government’s coronavirus response, Chancellor Rishi Sunak said that this will increase to 25% in 2023. However, most small firms will avoid this tax hike because the 25% rate will only be applied to companies with a profit over £250,000.
Furlough scheme extended until September
The Coronavirus Income Support Scheme is probably the most significant and one of the most popular aspects of the government’s response to the coronavirus pandemic. It allows businesses of all sizes to support staff, even if they’re not working or if they’re only working a portion of their hours.
As well as supporting employees, the furlough scheme can also be used by limited company directors. However, the level of support for directors is likely to be quite limited if they pay themselves using a combination of income and dividends.
The scheme has been extended until September, with businesses asked to contribute 10% of wages in July and 20% in August and September. Businesses will also need to cover employment costs such as employee NICs and pension contributions.
Self-employed income support scheme extended until September
The Self-Employment Income Support Scheme mirrors the furlough scheme and applies to anyone that is self-employed or in a partnership. It doesn’t apply to anyone that uses a limited company.
This scheme has also been extended to September and will be based on 2019 to 2020 tax returns. It will also be open to around 600,000 new people, those who became self employed during the 2019 to 2020 tax year and who have so far missed out on support.
Restart grant scheme
To help some of the businesses at the sharp end of the government’s coronavirus response reopen after a long lay off, Rishi Sunak announced a new grant scheme worth up to £18,000 for some businesses.
The grants will be available to businesses that were forced to close, including hospitality and non-essential retail and the money will be distributed by local authorities. As well as restart grants, the Chancellor also confirmed that the business rates holiday and the VAT cut for hospitality businesses would be extended.
Management training for small firms
A new ‘help to grow’ scheme is designed to help small businesses boost growth and productivity. The scheme includes heavily subsidised management training to improve things like strategy, decision making, efficiency and digital skills.
The government will cover most of the cost of the scheme for businesses with between 5 and 249 employees and there will be 30,000 places available over three years.
In the autumn, small businesses will also be able to apply for discounts on productivity software to assist with digital growth and presence.
Do you want help growing your business after lockdown? Speak to a member of the CloudAccountant.co.uk team today. Call: 0800 281 0303.