Autumn Budget 2021

On 27 October 2021, the Chancellor Rishi Sunak delivered his third Budget in conjunction with the Public Spending Review.

Below we have summarised the key points.

Business Rates:

• New reliefs for investment and improvements to business premises.
• There will be 50% discount for retail, hospitality and leisure sector up to a maximum of £110,000.
• The business rates multiplier will be frozen at 49.9p and 51.2p for a second year from 1 April 2022 until 31 March 2023

R&D Tax relief changes:

• Following Brexit, R&D tax relief is now limited to work only undertaken in the UK.
• The list of eligible expenditures for R&D will include data and cloud computing costs.
• HMRC will continue to target abuse of this generous tax relief and improve compliance.

Allowances

• The temporary £1 million annual investment allowance (AIA) will be extended from 31 December 2021 until 31 March 2023.
• Several new capital allowance measures were introduced, covering new and unused plant or machinery. This includes a 130% super deduction scheme for main pool plant and machinery, and a 50% SR allowance for special rate assets. See here for more information on other allowances that were introduced.

Residential Property Developer Tax

• The Residential Property Developer Tax (RPDT) that was announced earlier this year will come into effect from1st April 2022. An additional 4% of corporation tax will be charged on the profits of companies exceeding £25 million from UK residential property development. The new tax will be included in the corporation tax returns of those companies liable to the new tax.

Corporate Tax

• The Bank Levy which sees banks paid an additional 8% tax on bank profits, will be reduced to 3% from 2023, to coincide with the increase of corporate tax from 19% to 25%.

Group Relief – Cross Border

• With effect from the 27th October 2021, group relief for losses of 75% subsidiary companies resident in the European Economic Area and companies trading in the UK through permanent establishments will end

Creative Sector Relief

• There will be changes to several creative tax reliefs, including Theatre (TTR), Orchestra (OTR) and Museums and Galleries (MGETR) from the 27th October 2021.
• Eligible companies are currently able to claim an additional deduction in arriving at their profits. Where that additional deduction results in a loss, the company may surrender those losses for a payable tax credit. The doubling of the relief is available for the costs of the production/performance incurred between 27 October 2021 and 31 March 2023.

Capital Gains Tax Reporting

• For disposals of UK residential prop​​erty that complete on or after the 27th October 2021, the reporting and payment deadline will be 60 days after the completion date, instead of the previous 30 days.
• CGT Business Asset Disposal Relief continues resulting in a 10% CGT rate on the first £1 million of lifetime gains.

Alcohol Duty

• Duty rates on beer, cider, wine and spirits will be frozen for the next 12 months.
• Four new tax bands will be implemented around alcohol by volume (ABV) ratings.
• As well as a 5% cut in duty for draft beer and cider kegs of 40L or more, to support the pubs in our local communities and encourage consumers to go out as opposed to drinking at home.

Fuel Duty

• Fuel duty will be frozen for the next 12 months

Air Passenger Duty

• A new Air Passenger Duty will be introduced of £6.50 per flight on routes between England, Scotland, Wales and North Ireland
• Three new bands will be introduced to cover international travel further afield, with 0-2,000 miles from London at £13, 2,000 – 5,500 at £87 and 5,500+ at £91.

Tonnage Tax

• Tonnage Tax reforms will reward shipping companies for being registered in the UK. They will simplify flagging rules and conditions covering the treatment of dividends and other distributions of overseas shipping companies.

National Living Wage increased

• For those aged 23 or over, the national living wage has increased to £9.50 an hour.

Universal Credit taper

• An 8% reduction in the Universal Credit income taper was announced, meaning for every £1 earned, Universal Credit is reduced to 55p from 63p. This will be introduced before 1^st

No changes to income tax rates and personal allowances frozen

• The basic rate of income tax remains at 20%.
• The higher rate of income tax remains at 40% and the 45% additional rate continues to apply to income over £150,000.
• As announced in the March Budget, the personal allowance and higher rate threshold have been frozen at £12,570 and £50,270 until 2025/26.
• As announced on 7 September, from 6 April 2022 dividend income will be taxed at 8.75%, 33.75% and then 39.35% for basic, higher and additional tax rate payers respectively. The first £2,000 of dividend income continues to be tax-free. The summary of the economic impact published on Budget Day suggests that these rates will remain in place until 2025/26.

National Insurance Contributions

• Several thresholds are increased in line with inflation. The lower earnings limit is set to £123 per week, the primary threshold is set to £190 per week, meaning employees and the self-employed will start paying NICs at £9,880 and pay at 10.25% (self-employed) and 13.25% (employees) up to £50,270.
• A secondary threshold will be introduced set at £481 per week for Freeport employees working for an employer with physical premises in a Freeport Tax Site. This will apply from the 6th April 2022. The first Freeport Tax Sites announced so far are Humber, Teesside and Thames.
• The 1.25% increase in the rate of National Insurance Contributions (NICs) paid by workers and employers announced on 7 September to provide extra funds for Health and Social care will go ahead from 6 April 2022. As far as employers are concerned, the rate of secondary Class 1 contributions, Class 1A contributions and Class 1B contributions is 15.05% for 2022/23. The 1.25% will become a new Health and Social Care Levy from 2023/24 onwards.

  Read more about next year’s changes to National Insurance here.

Pensions

• The Finance Bill 2021-22 will include provisions to raise the age at which benefits can first be taken from pension schemes without incurring payment charges, from 55 to 57. This will have effect from the 6th of April 2028.
• Pension tax relief was unchanged. The annual pension input limit for most taxpayers remains at £40,000 which covers both individual and employer contributions. The lifetime pension allowance which dictates the size of the individual’s fund has been frozen at £1,073,100.

Savings

• The adult ISA annual subscription limit for 2022/23 will remain unchanged at £20,000 and the Junior ISA limit remains at £9,000 a year.

Contact us if you’d like to discuss any of the above and how it impacts you and your business.