Budget 2021 breakdown for Opticians
Like with any budget there are winners and there are losers. We believe in general this budget has been good for small independent Opticians and self-employed locums Optometrists and Dispensing Opticians. The government introduced further support in the extension of the Job Retention Scheme and Self-Employed Support Scheme, with an extension business rates and additional grants to help business reboot.
Albeit there is one thing the chancellor has again overlooked, in its help to the one-man limited company, which is a form a lot of locums Optometrists and Dispensing Opticians trade as. There was no announcement of any further support for small limited company directors who take most of their income through dividends and can only claim a small amount on the Job Retention Scheme.
At Locumkit Accounting, we can help you make sense of the Budget and of what it means for your business, so please don’t hesitate to get in touch with us today for more information.
Below we present the highlights from the Budget with a focus on how it can impact us within the Optical industry.
Furlough scheme extended to the end of September 2021
Extension to furlough payments for workers who can’t work because of pandemic restrictions until the end of September. However, after July, businesses will have to contribute 10% and, in August and September, 20%. This is in addition to the employer's national insurance and pension contributions they are already paying on hours not worked by employees.
The £2,500 monthly limit for the grant remains in place.
All employees who were on the PAYE Real Time Information (RTI) on or before 2 March 2021 are eligible to be furloughed for periods starting on or after 1 May 2021.
Extension of the Self-Employed Income Support Scheme (SEISS) and newly self-employed also now eligible
If you were one of the locums who started locuming post April 2019, you most likely would have missed out on the early grants. However, with having filed your recent 2019/20 self-assessment (by midnight on 2 March 2021) you will now be able to benefit from grant 4 and 5, given you meet all the other criteria’s. All other eligibility criteria will remain the same as the third grant. Further details will be published in due course.
If you were already eligible for the first three grants, now your self-employment average earnings will be based on the four years to 2019-20.
The fourth SEISS grant, covering February to April, will be paid in line with previous SEISS grants at 80% of average trading profits, up to a maximum of £2,500 a month.
The fifth grant will be dependent upon the reduction in income, where you will be able to get the full 80% if turnover is reduced by 30% or more. If turnover has fallen by less than 30%, then the grant is reduced to 30% (capped at £2,850). The drop in income will be for the period from April 2020 to April 2021.
Recovery Loan Scheme
This scheme replaces the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme, which are due to cease on 31st March 2021.
From 6th April 2021, the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes. We’ll give further details on the new scheme once they’re available.
New Restart Grants to help businesses reopen in England
In a bid to support the reopening of non-essential retailers, as well as the hospitality and leisure sectors, the Government is launching Restart Grants open to businesses throughout England.
Non-essential retail businesses will be able to claim for cash grants of up to £6,000 per premises, while hospitality, accommodation, leisure, personal care and gym businesses can claim up to £18,000 per premises given their later reopening date.
According to the guidance provided by the government, to be eligible you must meet the following criteria:
- Be based in England;
- Be based on a property which pays business rates;
- Had or have been required to close because of the national lockdown from 5 January 2021 onwards or between 5 November and 2 December; and
- Has been unable to provide the same level of in person customer service from its premises
We feel it is the last point, which can make Opticians potentially eligible for this scheme, especially whilst many have had triaging, appointments only policy during these lockdowns.
Applications for these grants are done through your local authority and will be open for applications from April 2021.
Corporation Tax to increase for larger companies
The Corporation Tax rate will remain at 19% for business profits up to £50,000 but will have a tapered increase to a main rate of 25% for profits over £250,000 from April 2023.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate of 25% reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
This will in evidently mean better tax planning is required on behalf of both locums and Optical store owners as to ensure you remain compliant with the new rules but also the most tax efficient.
VAT will remain at 5% until the end of September and then gradually increased to 12.5% for another six months before returning to the full 20% rate in April 2022. No other changes are being made to VAT.
The threshold for businesses to register for VAT will remain at £85,000 until 2024.
No changes to the VAT rates impacting Opticians, with our services remaining exempt from VAT and standard rates applying on sales of spectacles, contact lenses and any accessories – hence partial exemption rules will apply as normal.
Business rates reliefs
The business rate was due to end on March 31, but will now be extended in full until June 30, followed by 66% business rates relief for the period from 1st July 2021 to 31st March 2022, capped at £2 million per business for properties that were required to be closed on 5th January 2021, or £105,000 per business for other eligible properties.
Eligible properties are those in the retail, hospitality and leisure industries.
Payment increased to £3,000 (from £1.5k & £2k)and deadline to apply to September 2021. This is in addition to the existing £1,000 payment provided for all new 16-18-year-old apprentices, and those under 25 with an Education, Health and Care Plan.
A flexi-apprenticeship scheme was also announced that will allow apprentices to work with multiple employers in a sector.
Statutory Sick Pay
If you own an independent Opticians (i.e. small to medium-sized business) then you can reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the government.
Income Tax Rates and Thresholds
Personal Allowance (£12,570) and basic rate income tax limit (£50,270) are to be frozen at their 2021/22 levels until 2026.
National Insurance Contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate income tax threshold at £50,270 for these years.
National Minimum Wage
National Minimum Wage to increase to £8.91 per hour from 1 April 2021.
The threshold for paying Inheritance Tax has not changed at £325,000 and will be maintained up to 2026.
The Government intend to maintain the IHT tax-free thresholds and the residence nil rate band taper available for Inheritance Tax at their 2020/21 tax year levels for the next 5 years (up to and including 2025/26).
This means qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can potentially continue to pass on up to £1 million of assets without an Inheritance Tax liability.
Capital Gains Tax
Capital Gains Tax annual exempt amount frozen at its current level of £12,300 until 2026.
Universal Credit and Working Tax Credit
The temporary uplift of £20 to Universal Credit uplift will be extended by a further six months.
A £500 one-off payment for eligible Working Tax Credit claimants.
Alcohol and Fuel Tax
Alcohol and fuel duty continue to be frozen for the next 12 months.
Stamp Duty Land Tax
The Chancellor announced that the stamp duty holiday for the first £500,000 Nil Rate Band of the purchase price will continue until the end of June. From 1st July 2021, the Nil Rate Band will reduce to £250,000 until 30th September 2021 before returning to £125,000 on 1st October 2021.
Mortgage Guarantee Scheme
A new mortgage guarantee scheme will be introduced in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. Under the scheme, all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to.
The scheme, which will be available for new mortgages up to 31st December 2022.
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