26 Oct 2021
On 27 October 2021, Chancellor Rishi Sunak revealed the contents of his budget in the House of Commons, laying out the Government’s tax and spending strategy for the year ahead. So, what can SMEs expect in the coming months?
Minimum wage increase
Changes to alcohol duty
“Fairer” business rates
50% business rates discount for retail, hospitality & leisure
Tonnage tax system reform
Tax relief for theatres and galleries
Funding for brownfield development
Tax on developers to fund cladding
Research and development investment
Fuel duty rate rise cancellation
Recovery Loan Scheme extended by 6 months to 30 June 2022
The National Living Wage will increase by 6.6% for people aged 23 and above from April 2022, with the hourly rate rising from £8.91 to £9.50 an hour.
Younger workers will also receive an increase.
National Living Wage for age 23 and over: £8.91 to £9.50 an hour
National Minimum Wage for age 21-22: £8.36 to £9.18 an hour
National Minimum Wage for 18 to 20-year-olds: £6.56 to £6.83
National Minimum Wage for under-18s: £4.62 to £4.81
The Apprentice Rate: £4.30 to £4.81
In a bid to “radically” simplify alcohol duty, the Chancellor announced plans to introduce a system based around the concept of “the stronger the drink, the higher the rate”.
Planned increases in duty on spirits, wine, cider and beer will be cancelled. A new “draught relief” on draught beer and cider which will cut duty by 5%.
“It will apply to drinks served from draught containers over 40 litres,” the Chancellor told MPs. “It will particularly benefit community pubs who do 75% of their trade on draught.
The reforms will come into effect in February 2023.
The Chancellor said he will also end the “irrational” 28% duty premium on sparkling wines, and announced proposals for a new “small producer relief” to include small cider makers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).
The Chancellor shared plans to make the business rates system “fairer and timelier”. From 2023, re-evaluations will be carried out every three years.
Businesses looking to implement green infrastructure will also benefit.
"We’re introducing a new investment relief to encourage businesses to adopt green technologies like solar panels. And I’m announcing today that we’ll accept the CBI and the British Retail Consortium’s recommendation to introduce a new ‘business rates improvement relief’.
“From 2023, every single business will be able to make property improvements – and, for 12 months, pay no extra business rates.”
A new 50% business rates discount will be available for organisations in the retail, hospitality and leisure sectors. Eligible firms will be able to claim a discount on their business rates bills up to £110,000.
Rishi Sunak also spoke of reforms to the UK tonnage tax system, with ships and boats flying the British Red Ensign at sea receiving benefits.
He told MPs: “When we were in the old EU system, ships in tonnage tax were required to fly the flag of an EU state. But that doesn’t make sense for an independent nation.
“So I can announce today that our tonnage tax will – for the first time ever – reward companies for adopting the UK’s merchant shipping flag, the Red Ensign.”
The Treasury said it would also make it easier for ships that help the UK contribute to its net zero goals (e.g. cable-laying vessels for wind farms) to join the new tonnage tax regime.
Tax relief worth £250m will be made available for theatres, galleries and other cultural organisations until April 2023 to help them recover from the pandemic.
The Chancellor also announced plans to spend £800m to renovate museums, libraries and other local institutions. “Levelling up is also about protecting our unique culture and heritage,” he told MPs.
£1.8bn in funding will prepare brownfield land for new development. Sunak told MPs the investment in 1,500 hectares of land would help the government “unlock” 1m new homes.
The Treasury also confirmed a new tax on large residential developers to help fund the repair of tower blocks clad in unsafe materials.
The UK’s target for spending £22bn a year on research and development is to be delayed by two years until 2026-27, it has been confirmed, with the Treasury revealing that public sector investment in R&D would rise to 0.7 to 1.1 per cent by the end of the parliament.
“We are making the country a science and tech super power,” added Sunak.
Amid record-high petrol prices in the UK, the Chancellor confirmed that fuel duty will be frozen at 57.95p per litre for the 12th year in a row.
The Recovery Loan Scheme (RLS) is being extended by six months.
It was originally due to end on 31 December, however the Chancellor announced the scheme will continue until 30 June.
The finance available to businesses will decrease from up to a maximum of £10m per company to £2m, and the government guarantee will be reduced from 80% to 70% to encourage the lending market to move towards normality.
While the Budget contains some reassuring news for SMEs, we understand that many businesses are in need of additional funding.
From Recovery Loan Scheme facilities to many other types of business finance, we can help. Funding Options has been chosen by the government-owned British Business Bank as a designated platform to find finance for businesses.
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