Naturally, the pandemic has affected all of our lives and required all of us to adjust how we navigate our day-to-day activities. Businesses have felt the brunt of this, resulting in a number of businesses losing a majority of their revenue, and some being forced to close down altogether. Looking at some recent statistics, we can see that more than 97,966 businesses have permanently shut down during the pandemic, according to Yelp.com’s Local Economic Impact Report.
However, there were some measures put in place to help retain businesses around the UK, and keep them above water- Such as the Employment Retention Scheme. To put it simply, this was put in place in order to reduce redundancy and keep staff employed and paid, due to grants being made available if your business was eligible. The Uk Government paid 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month. This proved to be a huge help not only for employees but employers also, however, with the Government greatest efforts, many businesses would not cope with the financial pressure the pandemic put upon them. Look at Topshop for example, which have had to go into Administration- a form of bankruptcy; although inevitable, it was still a blow to society, reminding us that this unprecedented time really is affecting everyone. Although this all seems very gloomy, we must now look at what measures have been put in place to bounce back!
What measures have been put in place to help businesses recover?
Following Rishi Sunak’s debut speech on March 11th, a number of measures have been put in place to help stabilize the economy- these include:
RETENTION- As we mentioned before, the retention scheme put in place will be extended once again to the end of September 2021, with employers to raise their contribution from 10% to 20% in August and September.
BOUNCE BACK LOANS- These government-backed loans are aimed at SMEs ( Small and Medium-sized enterprises). These loans will be capped at £50,000, and no interest will be payable for the first 12 months, with an interest rate of 2.5% to initiate after this point. The applications for these ‘Bounce Back Loans’ will come to a close on the 31st of March 2021.
BUSINESS RATES RELIEF- One of the most important announcements was that for businesses in the retail, hospitality, and leisure sectors (something we are passionate about at Diamond Accounts). These businesses, with a rateable value of less than £51,000, will be fully exempt from business rates for this year.
VAT DEFERRED- HMRC has introduced a payment scheme for businesses struggling to meet the 31st of March deadline to pay their VAT liabilities; the earlier you sign up for this scheme, the more monthly instalments you will be granted (up to 11).
To look into this further, here is a great link to get more knowledge on Rishi Sunaks announcement: https://www.realbusinessrescue.co.uk/articles/covid19-coronavirus/how-is-the-government-helping-businesses-during-the-coronavirus-covid-19-outbreak
Aside from what has been mentioned above, how can we forget about the ‘Eat Out To Help Out’ initiative put in place last year? Not only did this help businesses get back on their feet but it also boosted morale among our society- reminding us that (with perseverance) things can slowly get back to normal. Just to recap, the EOHO scheme was one of the government policy measures aimed to support businesses reopening. Under the scheme, the Government provided 50% off the cost of food and/or non-alcoholic drinks eaten in. This proved to be extremely helpful, with a high number of businesses and customers taking advantage of this opportunity- as the Guardian states, ‘More than 49,000 businesses took advantage of the initiative to draw diners back….Venues claimed more than £849m through scheme’. With this scheme being so popular, it cost the Treasury over two-thirds more than the £500m Rishi Sunak set aside for…
Lastly, it is important we talk about the increase of the people’s personal allowance and the basic rate of income increasing in 2021 compared to 2020. The personal allowance (how much you need to earn before you start paying income tax) is increasing from £12,500 to £12,570. The basic rate of income (the amount you earn and have to pay 20% of your salary) is also increasing, This basically means that employees can earn a bit more money for free before they need to start paying tax back, presumably this is to make it easier on people after a tough financial year. This is a huge help to the everyday person, and considering that this pandemic has been the first of its kind for our generation, it is clear to see that as a society we have been able to come together with the help of our Government to get back to normal and financially recover as a nation.
To end this, let’s not forget about the sectors that have done extremely well during the pandemic- such as takeaway services such as Just Eat, and also the emergence of restaurants opening up their own takeaway services. It is said that during the first half of the year in 2020, the emergence of the pandemic boosted online orders, resulting in a 39 percent rise in revenue.
To conclude this brief recap on how the Pandemic has affected our tax and finances, it is important to reflect on a difficult year and remind ourselves that with positivity and perseverance we can see the other side and overcome the obstacles placed in our way!