Chancellor Rishi Sunak unveiled the contents of his highly anticipated Autumn Budget 2021 in the House of Commons last week. Despite the promise of Sunak’s much-hyped ‘Age of Optimism’ the budget only revealed a few benefits for small businesses. Overall highlights included:
- Business rates cut by 50% for retail, leisure and hospitality for one year: The Chancellor announced companies in the retail, hospitality and leisure sectors will have their business rates halved for one year. And pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all eligible for a tax cut worth £1.7billion, in the biggest cut to the tax in 20 years.
- Green business rates incentive: Sunak also said businesses will be encouraged to plough money into green technologies and ramp up investment in their factories and offices under new tax breaks. Investment incentives worth £750 million will allow firms to avoid sudden rises in their business rate bills after making improvements to their property.
- R&D spending pledge: Elsewhere, Mr Sunak confirmed a Government target to spend £22 billion on R&D by the end of Parliament, in addition to R&D tax reliefs. Put together, this means total public investment in R&D is increasing from 0.7 per cent of GDP in 2018 to 1.1 per cent of GDP by the end of the Parliament. The Treasury widened R&D tax reliefs to include cloud computing and data costs.
- Economic rebound:The country’s sharp rebound from last winter’s lockdown means that the economy is predicted to grow by 6.5 per cent in 2021. This is nearly twice as much as the 4 per cent predicted by the Office for Budget Responsibility (OBR) in its March forecast. The economy is expected to grow by a further 6 per cent next year.
- National Living Wage increase: The National Living Wage, paid to those aged 23 and over, will rise to from £8.91 to £9.50 an hour – an increase of 6.6 per cent.
- Annual Investment Allowance extended: The £1m Annual Investment Allowance – a break which allows firms to deduct the cost of investments from their taxable profits – will be extended to March 2023.
- National Insurance to rise: As announced in September, from April National Insurance rates for both employees and the self-employed will rise by 1.25 percentage points across earnings bands, raising around £12bn a year.
- Levelling Up Fund projects: The Chancellor also announced the first successful bids for the “Levelling Up Fund” to tackle regional inequality. The Government will spend £1.7bn on projects in a hundred locations, including Aberdeen, Clwyd South, Stoke-on-Trent, Ashton-under-Lyne, Sunderland, Doncaster and West Leeds.
Many benefits across the board, but the reason we agree with UK Business Forums in calling the Budget a “non-event” for small businesses is because of the following:
- While the budget announced a 50 per cent reduction in business rates for any small business in retail, leisure or hospitality shopkeepers’ Campaign chair Vivienne King said small business owners will face an excessive tax hike in April 2024 when the 50 per cent discount is removed.
- Simultaneously, Sunak said nothing about keeping the VAT rate for hospitality businesses, tourism and entertainment at 12.5 per cent beyond next April. Claire Bennison, head of ACCA UK said “A lower rate of VAT would help to ensure people keep coming through the doors regardless of locality or size of the business”.
- The Chancellor also ignored calls to make the Enterprise Investment Scheme for investment in innovative businesses more attractive. The EIS is currently due to expire in 2025. Following which Mark Brownridge, director general of the Enterprise Investment Scheme Association, said: “The investment gap for early stage growth businesses that are unable to attract funding through the banking sector, whether supported by government schemes or not, sits at in excess of £2.5 billion.”
Crowd For Angels CEO,Andrew Adcock added the following critique to the budget in perspective to small businesses that may be looking to fundraise in this “post-covid” era – “We would have liked to see the Chancellor support all businesses in this latest budget with greater SEIS allowances, wider cuts in business rates and a reintroduction of the Future Fund that provided many businesses from all different sectors a lifeline. ”
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