The Budget: how does it affect your beauty business?
Chancellor Rishi Sunak has announced his 2021 Budget, which outlines the Government’s plans to maintain jobs and help businesses survive as the UK emerges from the coronavirus pandemic.
The chancellor made his statement to the House of Commons on March 3, stating: “Since March 2020, more than 700,000 people have lost their jobs, the economy has shrunk by 10% and our borrowing is the highest it has been since war time – it will take a long time to recover from this extraordinary situation, but we will recover,” said Sunak.
The Office of Budget Responsibility (OBR) has forecasted a “swifter and more sustained recovery than expected”, with the economy expected to return to pre-Covid-19 levels by the middle of next year.
As a result, Sunak says the Government is announcing an additional £56 billion worth of measures to support the economy. This is how the Budget will affect the salon, spa and mobile/home-based beauty market.
How the Budget 2021 will affect your beauty business:
There will be a new Restart Grant in April to help businesses to “reopen and get going again” after coronavirus lockdown. Sunak said that non-essential retail businesses will reopen first so they will receive grants of up to £6,000 per premises.
Hospitality, leisure, Personal Care and gyms – businesses which will be reopening later or be more impacted by Government restrictions when they do reopen – will get grants of up to £18,000.
"That’s £5bn of new grants on top of the £20bn we’ve already provided, taking our total direct cash support to business to £25bn," said Sunak.
“I pay tribute to my right honourable friend, the MP for Romsey and Southampton North, for highlighting the particular needs of the Personal Care sector.”
The Coronavirus Job Retention Scheme (aka the furlough scheme) will be extended until the end of September 2021, paying up to 80% of people’s wages. As businesses reopen, the Government will ask them to contribute alongside the tax payer towards the scheme, asking for a 10% contribution in July, rising to 20% in August and September. “This scheme has effectively protected millions of peoples jobs and incomes,” said Sunak.
The Self-Employed Income Support Scheme will also continue, with a fourth grant covering the period February to April (three months of support at 80% of average trading profits) and a fifth and final grant available from May onwards.
As the economy reopens in the summer, the Government will target support to businesses most affected by the pandemic, whose turnover has fallen by 30% or more, and they will continue to receive the full 80% grant. People whose turnover has fallen by less than 30% will have less need for taxpayers support and will receive a 30% grant.
Help for the newly self-employed
The chancellor has also announced a major improvement in access to the self-employed, admitting that when the Self-Employed Income Support Scheme was launched the newly self-employed couldn’t qualify because they hadn’t filed the 19/20 tax return.
But, as the tax return deadline has passed, the chancellor confirmed that provided that they filed a tax return by midnight last night, more than 600,000 people who became self-employed last year can claim the fourth and fifth grants. The Government will have spent £33bn supporting the self-employed during the crisis, stated Sunak.
Business rate holidays will be extended until the end of June. Sunak said: "For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.”
The chancellor has confirmed that the 5% reduced VAT rate for the hospitality industry will be extended for six months to September 30, followed by an interim rate of 12.5% for another six months. The standard rate will not return until April 2022. There was no announcement about a Vat cut for the Personal Care sector.
National Living Wage (NLW)
The National Living Wage (NLW) will rise from £8.72 per hour to £8.91 per hour from April 2021. This change will result in a full-time worker on NLW expecting to receive £345 more a year.
The Government is doubling incentive payments to businesses to £3,000 for all new apprentice hires of any age. “We are taking what works to get people into jobs and making it better,” said Sunak.
Low income households
The chancellor is also extending the £20-a-week top-up to universal credit for a further six months to help struggling households.
New recovery loan scheme – businesses of any size can apply for loans from £25,000 up to £10m up until the end of this year.
Richard Lambert, chief executive of the National Hair & Beauty Federation (NHBF) said, “We welcome this budget. We’ve worked hard to inform and educate the government about our sector, particularly through our recent report, An Industry at The Sharp End. Their improved understanding is reflected in the whole package - above all, in securing the higher grants for Personal Care.
“We were worried that the most vulnerable in our sector would find it hard to survive to re-open, but both the Restart Grant and further funding for the self-employed have thrown a lifeline to struggling businesses and professionals. We will continue to press the case for a short-term reduction in VAT to help the hardest-hit hair & beauty businesses to recover.”
Commenting on the absence of a VAT reduction for personal care, Hellen Ward, managing director of Richard Ward Hair & Metrospa and co-founder of the Save Our Salons campaign, said: "This is not going to stop our campaign. We will be campaigning for a different treatment of VAT for salons. Part of the problem before was that we didn’t have our own sector. Now we do and we have a direct voice into the people heading up the personal care sector, and they are asking us for information and data. They are listening to us so don’t worry, we’re not going anywhere, we’re just now going to campaign for a model that’s going to work for the long term and be of more use to us than a short-term VAT cut."
Millie Kendall MBE, chief executive of the British Beauty Council, said: “I welcome today’s announcements, but we will remain committed to campaign for a VAT reduction of the Personal Care sector. Businesses told us in June last year what would make their recovery more viable, and the vulnerable, larger VAT-registered businesses did and still do believe that a VAT reduction is key to this. It seems like a simple mechanism which would help activate recovery for a services-based sector and help keep staff employed.”
The Hair & Beauty Charity have also weighed in, with president Samantha Grocutt commenting: "Today’s Budget announcement has some positive news for our beneficiaries – especially those who were self-employed in 2019 and have been part of the three million who have fallen through the net of Government financial support to date. Approximately 62.5% of the professional industry is working in a self-employed capacity. Our charity has been vital to support for them, so we’re pleased that there is now financial support available for those who need it and who meet the requirements for qualifying.
"However, we also know that many of the beneficiaries we are helping with financial support still may not qualify for the new self-employed support as many were self-employed in July 2020 either by losing their jobs or having their employment status altered. We have ring-fenced funds to continue supporting them. Further, the news that the sector’s lobbying for a VAT reduction to 5% has not been accepted will also affect salon owners who have been significantly impacted with almost nine months of salon closure."
The UK Spa Association (UKSA) have commented on the news: "The new measures outlined by the Chancellor, which are most pertinent to our sector, have given a much needed lifeline to the spa industry as we prepare to reopen and restart our businesses.
"We are delighted with the extension of furlough as this means that even with the social distancing measures and reduced capacity in place, this allows us to retain our workforce. While we have not received the requested VAT reduction, the extension of business rates is welcomed. The Chancellor gave the recognition to Caroline Noakes MP as well as the Personal Care sector mentioned several times which is a first time ever. He has announced the restart grants of up to £18,000 for our sector, which is triple that of non-essential retail who open at the same time as us but with less restrictions. We are absolutely delighted with this and know it will truly help our sector.
"Together, BABTAC, British Beauty Council, NHBF and UK Spa Association have been working as part of a Covid-19 Coalition to make a case to Government for the need for targeted support for our sector. This has included formulating a robust and fully-costed proposal for an immediate recovery fund for the personal care sector and a cut in VAT to five per cent once reopened in order to counter the effects of working at reduced capacity due to social distancing requirements. The Coalition continues to work together for the good of the sector to campaign for improvements in recognition and support for our sector now and going forward."
Michelle Ovens, founder of Small Business Britain, commented: “The new business grants for those hardest hit by restrictions are extremely good news and a step in the right direction. Retail, hospitality, leisure and the Personal Care sector have been devastated by the pandemic and need all the help they can get to get back on their feet. I am also pleased to see local councils incentivised to distribute their discretionary grants too as these should be a lifeline for a range of sectors, but have been widely held up across England.”
What do you make of the Budget 2021? Comment below.