Rishi Sunak, the Chancellor of the Exchequer, presented his first Budget of 2021 on the 3rd March. Just under eight months later, he was back on the 27th October to present his latest plan to guide the UK economy’s recovery from the COVID-19 pandemic. Like the majority of Government announcements, most of the Chancellor’s speech was leaked to the public in advance, so to quickly summarize what we already knew:
· £5.9bn for the NHS to tackle the backlog of people waiting for tests and scans
· £5.7bn for English city regions to spend on tram, train and cycle projects
· An increase in the National Living Wage from £8.91 an hour to £9.50
· £2.6bn for 30,000 new school places for children with special educational needs and disabilities
· £1.6bn over three years for new T-levels for 16 to 19-year olds and £554m for adult skills in England.
Whilst we don’t currently have the figures for the full year, it was initially reported that in the second quarter of the year (April to June) the UK economy grew at 4.8%. By the end of September that growth figure had been revised upwards to 5.5%. The ratings agency Fitch has predicted that the UK economy will grow at 6.5% this year, well above the forecast. The problems in the supply chain have been well documented and the UK is facing the threat of inflation, which reached 3.1% in August and has been forecast to average 4% by the end of the year. There was even better news on unemployment, which had originally been forecast to peak at 12%, but was now expected to reach a maximum level of 5.2%.
Changes to Personal Tax and Allowances
· Universal Credit taper rate cut by 8%, work allowance raised by £500. This will be introduced within weeks, no later than the 1st December 2021. Previously, for every £1 that an individual earned over the UC allowance, 63p was giving in tax. This has now been cut by 8% to 55p. The Government’s figures suggest 2 million families will be £1,000 better off per year as a result of these changes. NOTE: This only affects those who are working and receiving UC, not the individuals who are out of work.
· Health & Social Care levy will increase National Insurance Contributions by 1.25% from April 2022 onwards. The levy is designed to address the lack of funding for health and social care across the UK and will apply to anyone who pays Class 1 or Class 4 National Insurance Contributions.
· An increase to the rates of Income Tax on Dividends by 1.25%. This increase will also take place April 2022, making the basic rate on dividends 8.75%, the upper rate 33.75% and the additional rate 39.35%.
· Capital Gains Tax (CGT) on residential property reporting window increased. This is an immediate change that sees the deadline to report increase from 30 days to 60 days and applies whether you are a UK or non-UK resident.
· The income tax limits and personal allowance will remain at their current level until April 2026.
Pensions and Savings
· Suspension of the State Pension ‘Triple Lock’ for 2022/23. The Triple lock guarantees that the State Pension increases by whichever is greater out of average earnings, CPI or 2.5%. There is concern that due to the post-pandemic recovery and return to work, that this may result in average earnings displaying a rise of as much as 8% – so the government has temporarily suspended this for the 2022/23 tax year. Instead a ‘Double Lock’ will operate, with State Pension rising by the higher of CPI or 2.5%.
· Savings tax band, ISAs and Junior ISAs limits are unchanged for 2022/23.
Business Investment and Taxation
· The planned increase in business rates multiplier was cancelled, that was previously planned for the next tax year beginning April 2022. The Chancellor stated that this cut was worth £4.6bn to businesses over the next five years.
· There will be a business rates reform from 2023. A review of business rates was promised in the manifesto and the findings revealed that business rates raise £25bn annually, so the Chancellor promised to make them fairer and timelier. This means that there will be more revaluations, happening once every three years from 2023.
· At least a 50% business rate relief for retail, leisure and hospitality for 2022/23.
· Changes to R&D tax relief from April 2023. The scheme has been expanded to cover the cost of cloud computing and data. However, the UK R&D relief system will mirror the approach taken by the US and Australia by focusing on R&D activity within the domestic market. UK businesses claimed relief on £47.5bn of R&D spending in 2019, according to the government’s figures, but only £25.9 billion of this R&D was carried out in the UK.
· The £1 million annual investment allowance (AIA) limit for expenditure on plant and machinery will be extended until 31 March 2023.
· Banking Corporation Tax surcharge from April 2023. The Chancellor will be cut from 8% to a 3% surcharge over the standard rate, from April 2023, when the main rate of corporation tax rises to 25%. The 28% banks will pay is an increase from 27% previously.
· The new Scale-up Visa is designed to allow businesses access to highly qualified and skilled international workers. The full details were not revealed but applicants will need to pass language proficiency tests and earn at least £33,000.
· No changes to present rates and allowances. These are all frozen at current levels until April 2026. This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.
VAT & Duties
· There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.
· The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% on 1st October 2021 and will remain until 31st March 2022 when it will revert back to 20%.
· Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.
· VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
· VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
· Fuel Duty rates for 2022-23 will remain frozen.
· Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
· In wide-ranging changes to the whole regime for duties on alcohol, higher strength alcoholic drinks will attract higher duties and lower strength drinks will attract lower tax rates.
· Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
· Aggregates Levy – the government will freeze the Levy rates in 2022-23.
· Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
· Draught Relief and Small Brewers’ Relief will be introduced to encourage small scale brewers and pubs.
· The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing. From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.
· As mentioned above, the National Living Wage will increase to £9.50 per hour from £8.91 from 1 April 2022.
· The 21 to 22-year-old rate will be £9.18 per hour
· The 18 to 20-year-old rate will be £6.83 per hour
· The 16 to 17-year-old rate will be £4.81 per hour
· The apprentice rate will be £4.81 per hour
Over the days and weeks to come, further details will be released and we will continue to provide you with updates and details of these to support you as we continue to recover from the effects of the pandemic moving forward. If you have any queries or questions regarding any of the new measures and changes outlined, please do not hesitate to get in touch.
The CMA Team.
Accountant for New Business Start Up, Accountants in Wigan, Bookkeeping Services, Finance Performance, Outsourced Bookkeeping, Outsourcing Payroll & Pensions, Payroll In Wigan, Personal TAX Wigan, Setting Up a Business Wigan, Supporting Loan Applications Wigan, VAT Return,