Autumn Budget 2021: What to look out for

Throughout the pandemic, the government has been paying out unprecedented amounts of support to employers, businesses, and self-employed people to protect the economy from collapsing, at the same time as incurring all the costs of supporting the health system through its greatest crisis. We have been waiting for the bill to arrive – the tax increases that will pay for it all. 

Instead, Chancellor Rishi Sunak spent most of his speech at the 27 October Autumn Budget spreading more money to every corner of the United Kingdom. He spoke of billions here, millions there, freezing duty on fuel and alcohol, cutting business rates for small businesses, supporting families, building houses. Although he started by saying ‘we have challenging months ahead’, he moved rapidly on to what he called ‘an economy fit for a new age of optimism’.

Key Points

1.Temporary Business Rates Relief

To reduce the burden of business rates in England, the government will:

• freeze the business rates multiplier for a second year, from 1 April 2022 to 31 March 2023

• introduce a new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022/23, giving 50% relief up to a £110,000 per business cap, extend transitional relief for small and medium-sized businesses, and the supporting small business scheme, for 1 year, restricting increases in rates bills,

• subject to subsidy control limits

The government will reform the system of business rates by increasing the frequency of revaluations from 5 years to 3 years, starting in 2023. At the same time, it will introduce reliefs where occupiers incur certain types of expenditure on improvements, including eligible plant and machinery used in onsite renewable energy generation and storage

2. Corporation Tax

As announced in March 2021, the Corporation Tax rate will remain at 19% until 31 March 2023. It will then increase to 25% for companies with profits over £250,000. Since 1 April 2015, all corporate profits have been taxed at the same rate; the ‘small profits rate’ that was familiar before that will be reintroduced at 19% for companies with profits of up to £50,000.

Between £50,000 and £250,000 there will be a tapering calculation that produces an effective marginal rate of 26.5% on profits between these limits, but an average rate on all profits of between 19% and 25%. The limits will be divided between companies under common control.

3. NIC and Health and Social Care Levy

As announced on 7 September 2021, a new Health and Social Care Levy will be charged to raise £13 billion a year – dwarfing most of the other figures in the Budget policy decisions. In 2022/23, this will be achieved by raising the rates of NIC; in 2023/24, the levy will be formally separated from NIC and collected separately by HMRC, and will also apply to earnings that are not charged to NIC (principally earnings of individuals who are above State Pension age).

From 6 April 2022, Class 1 NIC paid by employers and employees, and Class 4 NIC paid by self-employed people, will increase by 1.25%. This means that employees will pay 13.25% from the primary threshold up to the upper earnings limit and 3.25% above that; employers will pay 15.05% on all earnings above the secondary threshold.

Self-employed people will pay 10.25% on earnings between £9,880 and £50,270 and 3.25% above that. The rates will revert back to their previous levels from 6 April 2023 when the separate levy is introduced.

The increase in the rates is offset to a very small extent by the increase in the thresholds below which no NIC are due. For example, the contributions for an employee with a salary of £50,000 will rise from £4,852 to £5,316 (employee’s) and from £5,680 to £6,155 (employer’s)

4. National Living Wage (NLW) and National Minimum Wage (NMW) increases

The NLW will increase by 6.1% for individuals aged 23 and over to £9.50 per hour from 1 April 2022. Other rates of NMW will rise from the same date by different percentages, as recommended by the Low Pay Commission.

5. Capital Gains Tax for UK property sales

Since 2015, non-UK residents have been required to report the sale of UK residential property, and pay any CGT due, within 30 days of completion of the transaction. This was extended to non-residential UK property in 2019 and, from April 2020, to UK residents selling residential property on which CGT is payable. The deadline is extended to 60 days for reporting and payment, for both UK and non-UK residents, where a transaction is completed on or after 27 October 2021.

6. Making Tax Digital (MTD) for Income Tax delayed

As announced on 23 September 2021, the government has decided to delay the requirement for sole traders and landlords with income over £10,000 to file income tax self assessment (ITSA) information using MTD until the tax year 2024/25. General partnerships will not be required to join the system until 6 April 2025.

At the same time that MTD for ITSA is introduced, new penalties for late filing and late payment will apply to those within the new system.

7. VAT default surcharge replaced

As announced in March 2021, the rules for late payment of VAT will be reformed for return periods beginning on or after 1 April 2022. Default surcharge will be replaced by interest on late payment and separate penalties for late filing of returns.

8. Recovery Loan Scheme extended

The Recovery Loan Scheme, which was introduced to help businesses recover from the impact of the pandemic, will be extended until 30 June 2022. The following changes will apply to all offers made from 1 January 2022:

• The scheme will only be open to small and medium-sized enterprises

• The maximum amount of finance available will be £2 million per business

• The guarantee coverage that the government will provide to lenders will fall to 70%

How we can support you

We have created a dedicated Budget Hub which includes our Budget Summary as well as comments from our team. 

We will review the new proposals to ensure we offer our clients the best advice to help them remain as tax efficient as possible. And our colleagues at Carpenter Box Financial Advisers are always on hand to help manage investments and pensions in these turbulent times.

For more information, please visit www.carpenterbox.com/budget2021 or call 01903 234094.