Key 2021 budget announcements – How it affects you
The government has made its budget announcements for 2021. Chancellor Rishi Sunak announced hospitality, retail, and leisure sectors which have been the hardest hit during the Covid-19 pandemic will be given a 50% discount on business rates for one year.
Business rates are charged on most non-domestic properties. For these sectors, this will include pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms. Any eligible business can claim up to a discount of £110,000. Sunak stated this is a tax cut worth 1.78bn. This will mean the average pub with a rateable value of £21,000 will receive support worth over £5,200, or 50% of their rates liability for the year.
Sunak also stated that getting rid of business rates would be irresponsible as they raise up to 25bn for the UK economy but in order to make things fairer rates they will be re-evaluated every 3 years and a new investment relief will encourage investment in technologies such as solar panels.
In a tweet, Sunak said the move was “a tax cut worth almost £1.7bn and with small Business Rates Relief over 90% of all these businesses will see a discount of at least 50%. Taken together, today we cut business rates by £7bn”.
Sunak also spoke of businesses’ burden of dealing with increased tax liabilities which is likely to rise next year as a result of inflation. Sunak announced next year’s planned increase in the multiplier will be cancelled in order to tackle this.
In addition to this, from 2023, all firms, not just in retail and hospitality, would be able to make improvements to their property without having to pay extra business rates for 12 months.
Businesses that also trade heavily in alcohol will also experience a change in a cut in the main duty rates from 15 to 6. Alcohol will now be taxed based on its strength rather than the current system, which has been in place for decades.
Image by bbc
This overhaul in the system will impact alcohol traders differently. Those that produce and trade heavily in low strength alcohol drinks will likely benefit while those that deal more in higher strength drinks will likely be negatively impacted by the changes.
In a move to help struggling pubs, Mr Sunak announced a new lower rate of duty for draught drinks, which would cut the cost of a pint by about three pence. He said the “draught relief will cut duty by 5%”. This will apply to drinks served from draught containers over 40 litres”. This announcement is meant to be would particularly beneficial to community pubs “who do 75% of their trade on draught”.
He also announced proposals for a new “small producer relief” to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).
While many of these announcements will come as welcoming news to businesses they will also have to contend with an increase in the minimum wage. The National living wage is set to increase next year by 6.6% to £9.50 an hour. Sunak hopes this will help more than over 2 million of the lowest-paid workers.
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