Budget 2021

Updated on 4 March 2021.

Latest update following the chancellor's Budget on 3 March 2021. As is the case with all announcements, it will be several days before the full details become clear and several weeks before the finer details are thrashed out. This page will be updated as and when we receive more information.

It would be impossible for me to cover everything announced in the Budget here and please be aware I can't cover each point in great detail. However, I've extracted all the main points relevant to anybody running a photography business as a Limited Company, Partnership or sole trader and I've tried to explain them in language you'll understand.

 

CORONAVIRUS SELF-EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)

The government have now released details of the fourth grant to cover the months of February 2021 to April 2021. This will be at 80% of your monthly taxable trading profit for the 3 month period. Unlike the previous grants, eligibility will be based on your 2020 tax return opening this grant up to many of you who had previously slipped through the net.

You'll be able to claim for the full 3 month period from late April and the final date to make a claim is 31 May 2021.

To be eligible to claim, you must either be currently trading but are impacted by reduced demand due to coronavirus or have been trading but are temporarily unable to do so due to coronavirus.

You must also be intending to continue to trade and reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus.

HMRC will contact you if you're eligible for the scheme and invite you to apply online. If they haven't, you can get more information and check your eligibility here - Claim a grant through the Self-Employment Income Support Scheme.

Let's break this down:

  • Taxable trading profit is the figure on your Self Assessment tax calculation for profit from self-employment. If we filed your tax return in 2020, it's the figure for 'Profit from self-employment' on the first supplementary page at the back of your tax return titled 'Tax calculation for 2019/20 (year-ended 5 April 2020)'. This page is the third party equivalent of the form HMRC refer to as SA302.
  • If you're a partner in a Partnership, it's the figure on your invidual tax return (ie profit share) that will be used in the calculation.
  • Your profit from self-employment must be less than £50,000 per annum.
  • Your profit from self-employment must be no less than 50% of your total taxable income. Total taxable income includes employment, property, bank interest, dividends etc.
  • The grant will be capped at £7,500 in total (per 3 month period).
  • It will be paid directly into your bank account in one instalment and will be taxable.
  • If you're not eligible based on your 2020 tax return (ie your self-employment income is less than 50% of your total taxable income), HMRC will then look at your tax returns for 2017, 2018, 2019 and 2020 to check if the average of your trading profits across the 4 years made up more than 50% of your total income.

To calculate the amount of your claim:

  • Following the advice above, take the average figure for 'Profit from self-employment' for up to 4 years from your tax returns for 2020, 2019, 2018 and 2017.
  • If you made a loss, the figure to include for that year is zero. If you carried forward this loss to the next year, deduct the figure for 'Income tax relief' from the figure for 'Profit from self-employment'.
    • If 2020 is your first year of trading, it will be based on this year only.
    • If 2019, it will be based on 2020 and 2019.
    • If 2018, it will be based on 2020, 2019 and 2018.
    • If 2017 or earlier, it will be based on all 4 years.
  • Divide this by 4 to calculate your profit for the 3 month period.
  • Multiply by 80%.

A fifth grant has also been announced to cover the months of May 2021 to September 2021.

HMRC have apparently invented a complex turnover test. Only those businesses where turnover has fallen by at least 30% will get the full grant calculated at 80% of average trading profits as above.

Other businesses whose turnover has fallen by less than 30% will receive a grant based on 30% of average profits, capped at £2,850.

The grant has previously been calculated on historic profit figures from information HMRC already holds. HMRC don't have any information on your business since March 2020, the date of your last tax return. As the pandemic didn't start to affect us until March 2020, I'm not sure how this turnover test will be implemented.

I will update this page as soon as more information is released.

 

CORONAVIRUS JOB RETENTION SCHEME

This scheme has now been extended until 30 September 2021. HMRC will continue to cover 80% of the salary of employees who would otherwise have been laid off during this crisis. This is subject to a cap of £2,500 per month.

In July, HMRC will cover 70% of the salary of employees up to a cap of £2,187.50 per month.

In August and September, HMRC will cover 60% of the salary of employees up to a cap of £1,875 per month.

For these 3 months, the employer must top up the employee's salary to at least 80%.

To recap the rules:

  • From 1 May 2021 onwards, this is available to all employees on the payroll before midnight on 2 March 2021. This means that an RTI submission to HMRC on or before this date must have been made.
  • All UK businesses are eligible.
  • Once furloughed, an employee is not allowed to do any work for the business. Directors can be furloughed but other than statutory duties, they are not allowed to do any work for the company. This would include dealing with bookings/postponements and cancellations unfortunately. However, flexible furlough was introduced in July allowing employees to work part-time and to claim for the hours they didn't work.
  • The furlough calculation is based on the higher of:
    • same earnings for the corresponding month last year.
    • average monthly earnings from the 19/20 tax year.
  • The calculation above still applies to employees who had returned to work before being re-furloughed.
  • The calculation for new employees on the payroll as at 30 October 2020 who furloughed for the first time is based on:
    • fixed salary - earnings in the last pay period ending on or before 30 October 2020.
    • varied pay - average earnings between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough period begins.
  • The calculation for new employees on the payroll as at 2 March 2021 is still to be confirmed. I will update this page when the details are released.

 

CORPORATION TAX RISE

Corporation Tax will increase from 19% to 25% from 1 April 2023.

This will only be applicable to companies with taxable profits over £50,000. There will then be a tapered increase up to £250,000 so only companies with taxable profits over this amount will be charged the full 25%.

 

SUPER-DEDUCTION TAX RELIEF

This announcement prompted a flurry of emails so I'll recap here exactly what I emailed my clients last night.

The chancellor announced a 'Super-deduction' where companies can claim 130% of investments against tax. This will be applicable from 1 April 2021.

Unfortunately, it's not available to sole traders or partnerships. Yes, I know, it seems unfair but I think the government are softening the blow of the impending Corporation Tax rise mentioned above.

If you're a company director, you may be thinking "Wow, this sounds great. I can buy a lens for £1,000 and save £1,300 against my tax bill. This sounds too good to be true!". That's because it is! It's still a great saving though.

At the moment, most equipment you purchase can be claimed as a first-year capital allowance. It's called the Annual Investment Allowance (AIA) and 100% can be claimed against taxable income. Here are some examples:

No allowance claimed

  • You've made a profit of £3,000.
  • Tax due at 19% would be £570.

Annual Investment Allowance (AIA) claimed

  • You claim the AIA of £1,000 (100% of the value of your new lens).
  • Taxable profit would be £2,000.
  • Tax due at 19% would be £380.
  • You've saved £190 which is 19% of the value of your new lens.

Super-deduction claimed

  • You claim the new Super-deduction of £1,300 (130% of the value of your new lens).
  • Taxable profit would be £1,700.
  • Tax due at 19% would be £323.
  • You've now saved £247. This is 130% of what you would have saved previously (£190 x 130% = £247).

It can be misleading to read you can claim 'against tax'. This could be misconstrued as being able to spend £1,000 on a new lens and decreasing your tax bill by £1,300. That is definitely not the case.

 

TEMPORARY CARRY BACK OF TRADING LOSSES

Currently, any trade losses can be carried back and offset against profits of the previous year. This has now been extended to a period of 3 years, with losses being carried back against later years first.

This will be applicable for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years ending 5 April 2021 and 5 April 2022 for unincorporated businesses.

 

RESTART GRANT

This is a support package aimed at helping businesses that have had to close due to lockdown restrictions.

Photography studios will be eligible for a grant of up to £6,000 per premises. You must occupy property on which you pay business rates to be eligible.

Applications will open in April and you'll need to contact your local council.

 

BUSINESS RATES HOLIDAY

For those of you who pay business rates, these have been scrapped for 12 months from 1 April 2020. This has now been extended until 30 June 2021. You'll need to get in touch with your local authority if you haven't already done so.

 

RECOVERY LOAN SCHEME

A new loan scheme was announced which allows banks to offer loans to all small businesses and the self-employed. The Government will provide lenders with an 80% guarantee on the value of the loan which opens this up to those of us who would be unable to get a loan under normal circumstances due to inadequate security. Loans will be available between £25,001 and £10,000,000 and finance terms will be up to 6 years for loans, 3 years for overdrafts.

This scheme opens on 6 April 2021 and will be available until 31 December 2021.

The government will release details on how to apply and details of accredited lenders in due course.

 

BOUNCE BACK LOAN SCHEME (BBLS)

This loan has been extended to 31 March 2021.

This scheme allows banks to offer loans to all small businesses and the self-employed. The Government will provide lenders with a 100% guarantee on the value of the loan which opens this up to those of us who would be unable to get a loan under normal circumstances due to inadequate security. There will be no fees or interest to pay for the first 12 months then after this period the interest rate will be only 2.5% a year. Finance terms for the loan were initially up to 6 years but have now been extended to 10 years.

You can borrow between £2,000 and 25% of your business' turnover. The maximum loan amount is £50,000.

You can apply simply by contacting one of the 11 accredited lenders. It should take no longer than a standard application.

Most participating lenders have a dedicated page explaining the application process.

Please visit British Business Bank - Bounce Back Loan Scheme for full details.

 

BOUNCE BACK LOAN SCHEME (BBLS) TOP-UPS

These are open to businesses who took out a Bounce Back Loan but didn't borrow the maximum amount of 25% of your business' turnover.

Top-ups will be available to increase your existing loan to the higher of 25% of turnover or £50,000.

Please visit British Business Bank - Bounce Back Loan Scheme for full details.

 

CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)

This loan has also been extended to 31 March 2021.

If you want to borrow more than is permitted under the Bounce Back Loan Scheme (BBLS), then this can be a viable alternative.

The Government will provide lenders with an 80% guarantee on the value of the loan and will also cover the first 12 months of interest payments and any arrangement fees (although many lenders have said they'll waive these fees anyway). Unlike the Bounce Back Loan Scheme (BBLS), interest rates are set by the lender as opposed to the fixed 2.5% rate. Finance terms for the loan were initially up to 6 years but have now been extended to 10 years.

You can apply simply by contacting one of the 40+ accredited lenders. It should take no longer than a standard application.

There are a few eligibility restrictions but thankfully photographers are not amongst them. However, you must have a borrowing proposal which would have been considered viable by the lender before the current pandemic.

Most participating lenders have a dedicated page explaining the application process.

Please visit British Business Bank - Coronavirus Business Interruption Loan Scheme for full details.

 

PERSONAL ALLOWANCE

The tax-free personal allowance will increase from £12,500 to £12,570 from 6 April 2021 and will be fozen at this level until 2026.

The higher rate threshold will increase from £50,000 to £50,270 from 6 April 2021 and will be fozen at this level until 2026.

The National Insurance Primary threshold will increase from £9,500 to £9,568 from 6 April 2021.

The National Insurance Secondary threshold will increase from £50,000 to £50,270 from 6 April 2021.

 

VAT PAYMENTS DEFERRED

The government initially announced a 3 month VAT payment holiday from 20 March to 30 June.

The government have now announced that instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.

 

MORTGAGE HOLIDAYS

UK banks are offering various relief measures to customers affected by coronavirus (this includes loss of income). The measures vary slightly from bank to bank but include repayment holidays on mortgages and loans of up to 3 months, increased credit card limits and the ability to withdraw funds from fixed savings accounts with no charges. I would recommend contacting your bank directly.

If you haven't already claimed a mortgage holiday, the closing date is 31 March 2021. If you have already claimed, you can apply to extend this holiday by up to a further 3 months up to a maximum of 6 months.

 

LOCAL RESTRICTIONS SUPPORT GRANT

Businesses who pay rates on their premises and are required to close in England for more than 3 weeks due to local or national restrictions will be eligible for the following:

  • Grants of £1,334 per month for properties with a rateable value of £15,000 or under.
  • Grants of £2,000 per month for properties with a rateable value of between £15,000 and £51,000.
  • Grants of £3,000 per month for properties with a rateable value of between £51,000 or over.

You'll need to contact your local council for application details. If you don't pay rates, see below for discretionary funding.

Similar grants are available in Scotland, Wales and Northern Ireland. Contact your local council for more information.

 

ADDITIONAL RESTRICTIONS SUPPORT GRANT

This grant is provided by local councils to support closed businesses that do not directly pay business rates as well as businesses that do not have to close but which are impacted.

Local councils have the freedom to determine the eligibility criteria for these grants and the amount of funding.

You'll need to contact your local council for application details.

 

DISCRETIONARY FUNDING

You may receive a grant of up to £1,500 at the discretion of your local council if:

  • Your business is required to close but you do not pay business rates.
  • If your business is not required to close but has been severely affected.

Your local council will publish details of discretionary funding on their website.

 

STATUTORY SICK PAY (SSP)

If you employ staff who are off sick due to coronavirus (either illness or staying at home on government advice), the government will refund up to 14 days of SSP. This will be available from day one as opposed to day four.

I will do my best to update this page as soon as anything changes but I hope you find it helpful.

Stay safe everyone.

Go back...

Share this post