Autumn Budget 2021 and your small business

What Autumn Budget 2021 means for small business - expert analysis, reaction and live coverage from the House of Commons as Chancellor Rishi Sunak delivers the Budget

UPDATED: Small business leaders have reacted more to today’s Autumn Budget in terms of what it left out for small business than what was actually announced.

UK Business Forums described today’s Autumn Budget as a “non-event” for small business that offered little reassurance of a robust plan for their economic recovery.

Richard Osborne, founder of UKBF, said: “Rishi Sunak’s much-hyped ‘Age of Optimism’ has left small business owners feeling less than enthused. After the highs and lows of the roller-coaster that small business owners have ridden for the past 18 months, the Budget is something of an anticlimax.”

“Small businesses aren’t out of the woods yet and we were disappointed by the lack of small business-focused policy, particularly for those without a premises, in the Autumn Budget statement,” said Oliver Prill, CEO of SME financial platform Tide. “Small businesses should not be forgotten.”

Today’s Autumn Budget announcement of a 50 per cent reduction in business rates for any small business in retail, leisure or hospitality is still a betrayal of the High Street, said lobbyist Shopkeeper’s Campaign.

Small business owners will face an excessive tax hike in April 2024 when the 50 per cent discount is removed, said Shopkeepers’ Campaign chair Vivienne King.

Meanwhile Mr Sunak’s pledge to make business rate evaluations more frequent is simply a reannouncement of what Philip Hammond promised in 2017, she said.

“We are deeply disappointed that there is no commitment to annual revaluations so that tax bills reflect the market property values,” said King.

However, what the Chancellor giveth with one hand, he taketh away with the other and Mr Sunak said nothing about keeping the VAT rate for hospitality businesses, tourism and entertainment at 12.5 per cent beyond next April.

Sue Rathmell, partner at MHA, described the return of the full 20 per cent rate in April 2022 as a “crushing disappointment for the sector”.

“A lower rate of VAT would help to ensure people keep coming through the doors regardless of locality or size of the business,” said Claire Bennison, head of ACCA UK.

Although the Budget did nothing for the self-employed, Seb Malley of self-employed contractor insurance firm Qdos was sceptical about the Chancellor’s continual eulogising of entrepreneurs.

Malley said: “In his speech, the Chancellor was self-congratulatory about the government’s treatment of entrepreneurs. This is now a tired-out, unconvincing rhetoric and one that’s falling on deaf ears.”

And 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.

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.”

Autumn Budget 2021 what it means for small business

Here is a resume of the key announcements made by Chancellor Rishi Sunak this afternoon in a rowdy House of Commons affecting small business:

Business rates cut by 50% for retail, leisure and hospitality for one year

Chancellor Rishi Sunak has announced companies in the retail, hospitality and leisure sectors will be have their business rates halved for one year.

Pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all eligible for a tax cut worth £1.7bn, in the biggest cut to the tax in 20 years.

From 2023, commercial properties subject to business rates will be revalued every three years rather than five years at present.

Referring to Labour’s plan to abolish business rates eventually, Mr Sunak said: “It would be wrong to find £25bn in extra borrowing, cuts to public services, or tax rises elsewhere, so we will retain business rates, but with key reforms to ease the burden and create stronger high streets.”

He also scrapped next year’s planned annual increase in rates for all companies, meaning bills will be 3 per cent lower.

Green business rates incentive

Mr 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 £750m will allow firms to avoid sudden rises in their business rates bills after making improvements to their property, the Chancellor announced.

The business rates system effectively punished firms for investment, as this increased the value of their property and subsequent tax bills.

R&D spending pledge

Elsewhere, Mr Sunak confirmed a Government target to spend £22bn 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 this year, the Chancellor said. This is nearly twice as much as the 4 per cent predicted by the Office for Budget Responsibility (OBR) in its March forecast. It is due 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.

The rise in the National Living Wage has been recommended by the Low Pay Commission, the independent body which advises Government on the issue. The increase amounts to an additional £1,000 a year for someone in a full-time role working about 35 hours a week.

In 2019, the Conservative government pledged to increase the National Living Wage to about £10.50 per hour, making it the highest in the developed world.

However, small businesses have warned that increasing wages too much will put jobs under threat as many low-paid sectors recover from the Covid blow.

One third of small businessees are planning to increase prices to pay for a bigger wage bill while 15 per cent said it would affect hiring, according to a survey by the Federation of Small Businesses.

Mike Cherry, chairman of the FSB, warned that any pay rise “must be affordable without jeopardising jobs”.

“Small firms are still trying to recover from the pandemic, and the last thing they want to do is to force customers to pay more or make cuts to staffing numbers,” he said.

Sandra Rowley of card payment solutions provider Takepayments said that the minimum wage rise would be “another cost challenge” for small business owners, as the 6.6 per cent increase will cost them £1,000 per year for each minimum-wage full-time worker.

According to Takepayments, one in four (28 per cent) of small business owners think the Government should offer them extra support to help cover the minimum wage increase.

“The overall business environment will remain challenging for those small, independent businesses in the UK,” said Rowley.

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.

Live blog

Hello and welcome to SmallBusiness.co.uk’s live coverage of today’s Budget, which we will update as a live blog as Chancellor Rishi Sunak makes announcements that directly effect the 6m small business owners in Britain. We will have follow-up analysis and reaction from sector experts and trade associations as the implications of today’s Budget become clear.

13:37: In a £2bn tax cut, Universal Credit taper to be reduced from 63 per cent to 55 per cent, letting people keep more of their UC money if they are in work. “I want this to be a society that rewards energy, ingenuity and inventiveness,” Mr Sunak told a rowdy House of Commons.

13:33: Mr Sunak confirms that National Living Wage will rise to £9.50 an hour, which is a a pay rise worth £1,000 a year for a low-paid worker.

13:28: Business Rates review to be published today. Business rates evaluations to take place more frequently every three years from 2023.

Introducing investment relief for new green technology such as solar panels.

From 2023 no increase in business rates if businesses have improved their infrastructure, equating to £750m in business incentives.

Next year’s planned increase to the business rates multiplier will be scrapped.

One year 50 per cent discount for retail, leisure and hospitality business rates up to £110,000 a year, worth £1.7bn in total. Combined with existing business rates relief, that means over 90 per cent of businesses will have some form of business rates relief in a package worth £7bn in cuts to business rates.

13:18: £1m Annual Investment Allowance to be extended to March 2023. “We want this country to be the most exciting and dynamic place in the world to do business,” says Mr Sunak.

13:11: From April 2023, greater investment in domestic R&D through reform of the R&D tax regime.

13:09: British Business Bank regional investment programme lifted to £1.6bn.

13:05: £1.4bn Global Britain Investment Fund to encourage overseas investment in life sciences and electric vehicles confirmed

13:03: R&D investment to stay at £22bn a year but pushed back 2026-27. Sunak says total R&D investment will rise from 0.7 per cent to 1.1 per cent of GDP by the end of this Parliament. “Over the long term, the only way is through economic growth … investing in innovation and skills,” says Mr Sunak.

12:58: £1.7bn Levelling Up Fund for 100 areas will include £170m for levelling-up projects in Scotland and £50m for levelling-up projects in Northern Ireland. “Our stronger economy lays the foundations for growth,” says Mr Sunak. “The whole of the UK will benefit from the Shared Prosperity Fund.”

12:42: OBR expects economy to return to pre-Covid levels by the end of this year. Business investment has been revised up over the next five years.

12:39: Inflation was 3.1 per cent in September and the OBR expects the CPR to be over 4 per cent over the next year.

12:35: Rishi Sunak stands to deliver Autumn Budget 2021. “This Budget is about what this Government is about, investment in a high-tech economy … it must come from the drive of our entrepreneurs.”

Further reading

Half of small businesses poisoned with ‘toxic debt’

Related Topics

Budget 2021
Rishi Sunak

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