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Autumn Budget 2021: What it means for SMEs

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, we thought that we would put together an overview of the outcome of this for you as it does contain some reassuring news for SMEs,

At a glance some bullet points of the Budget’s impact on businesses:

  • 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

1. Employers: The minimum wage is increasing

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.

Minimum wage increases from 1 April 2022:

  • 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

2. Hospitality & beverages: Changes to alcohol duty

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 not come into effect until 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)

3. Business premises: “fairer” business rates

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.”

4. Retail, hospitality & leisure: 50% business rates discount

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.

5. Shipping: tonnage tax system reform

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.

6. Theatre & galleries: tax relief

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.

7. Property development: Brownfield funding and tax

£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.

8. Research & Development: Public sector investment

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.

9. Fuel: Duty rate rise cancelled

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.

10. Funding: Recovery Loan Scheme extended

While the Budget contains some reassuring news for SMEs, we understand that many businesses may be in need of additional funding as they grow and recover from the disruption of the COVID-19 pandemic, so we would like to point out that the Recovery Loan Scheme is being extended by six months. The scheme will now continue until 30 June to support UK businesses.

The Recovery Loan Scheme is currently open to businesses of any size to support them to access loans and other kinds of finance so they can recover after the pandemic and transition period.

Up to £10 million is available per business. The actual amount offered and the terms are at the discretion of participating lenders.

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