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Autumn Budget 2021 – an overview

28/11/2021

The Chancellor of the Exchequer, Rishi Sunak, delivered his Autumn Budget 2021 and spending review on 27th October 2021. While there were some welcome measures introduced in the Budget, it lacked any significant announcements for businesses. The focus was clearly on government investment to back further economic growth in the post-Covid era.

In this article we give an overview of the key announcements.

Tax Reliefs and Growth Incentives

• An extension to the £1m level of the annual investment allowance until 31 March 2023. This relief helps businesses that want to invest in plant and machinery.
• Various measures to support the creative sector, including a two-year tapered rate increase for theatre, orchestra and museum, galleries, and exhibition tax relief (MGETR) from April 2022.
• Fuel duty to continue to freeze at 57.95 pence per litre for 2022/23 – the 12th consecutive freeze – will help businesses as petrol prices rise.
• An introduction of a new temporary 50% relief up to £110,000 per business for eligible retail, hospitality, and leisure businesses.
• An expansion to R&D tax relief to include cloud computing and data costs from 1 April 2023, however there will be a restriction or possible prohibition on the inclusion of overseas costs in UK R&D claims.

Support for Start-Ups

• Continuing support for the Kickstart scheme and the Help to Grow management and digital schemes, extending the former to March 2022 and putting more funding into the latter.

Tax reforms

• A new residential property development tax introduced from 1 April 2022 at a rate of 4% on relevant group profits over £25 million. Residential property profits will be calculated on the same basis as corporation tax, with a restriction for finance costs.
• From 2023, alcohol duty rates will be based on percentage alcohol, with a draught relief for pubs and other similar establishments. This will reduce the rates for sparkling wine, such as Champagne and English sparkling wine, but will increase the rate for higher strength ciders and red wine – the key is that in general higher strength means more duty is paid.
• The introduction of the Health & Social Care Levy will add 1.25% to both employees and employers Class 1 NIC (including Classes 1A and IB) and to Class 4 NIC from 6 April 2022 (a combined increase of 2.5%). This increase will be reversed in the 2023-24 tax year but will be replaced by the new levy in the same amount. In addition, the Health and Social Care Levy will apply to those over state retirement age who do not currently pay NIC.
• The National living wage will rise to £9.50/ hour from April 2022.

Other

• The new digital reporting under Making Tax Digital for Income Tax has been delayed until April 2024.
• As a part of this, following consultation, one major change is to basis periods, so that business profits would be charged to income tax as they arise from month to month, rather than the current rules based on accounting periods. This will also come into full effect for the 2024/2025 tax year, with a 2023/24 transitional year.
• A relaxation in the reporting and payment deadline for capital gains on UK residential property from 30 to 60 days.

In summary, with significant tax-raising measures already having been announced, including the corporation tax increase to 25% from 1 April 2023, the inflation impact of freezing of personal allowances and rate bands, as well as the new health and social care increases, there was little need for the Chancellor to raise additional taxes in this budget.

It would seem that the Chancellor is waiting for the uncertainties in the economy to be resolved, before returning to a tax cutting budget in the run up to the next general election.

If you have any questions about how the budget will affect your personal or business taxes, don’t hesitate to contact us.