The Autumn Budget 2021 – The details you need to know
The budget, which was presented by the Chancellor Rishi Sunak, expressed the Government’s plans now that we are entering a ‘post covid age of optimism’. It took place with the country now focussing on recovering from a difficult period of economic uncertainty and looking towards an improved future.
Despite the pandemic affecting all our lives and the economy drastically over this recent period, the economy is now growing at a faster rate than initially anticipated. As a result of this, the Chancellor made it clear that ‘no doubt – our plan is working’.
Employment is now on the rise which displays improvements from the last Budget where unemployment was at its highest rate since 2016. As well as this, public services are improving, public finances are stabilising, and wages are also on the increase.
Below is a summary of the key points stated by the Chancellor in the Autumn 2021 Budget on Wednesday 27 October 2021.
Business Tax
Corporation tax rates
The corporation tax rate will remain at 19%, however, from April 2023 the tax rates will be 19% and 25%. Companies with profits below £50,000 will be the ones who are able to benefit from the lower rate of tax – 19%. The tax rates for companies with profits between £50,000 and £250,000 will be tapered. This means only companies who exceed profits of £250,000 will pay the full rate of 25%.
Research and development (R&D)
Small and medium-sized enterprises (SMEs) applying for R&D tax credits will be eligible to a maximum of £20,000 in repayments per year plus three times the company’s total PAYE and NIC liability.
Capital allowances
From 1 April 2021 to 31 March 2023, super deduction will be introduced. The aim of this is to encourage corporate entities to continue investing in qualifying plant and machinery. This will be at 130% of the investment cost.
There will also be the benefit of a 50% first-year allowance for qualifying special rate assets.
AIA of £1m will also be extended until 31 March 2023. This results in businesses having longer to decide on bringing forward capital investments of between £200,000 and £1m, claiming tax relief on the costs in the year of investment.
Rates
Business rates in England are moving to a more frequent revaluation cycle of every three years from 2023. Hospitality, retail, and leisure properties will have a new temporary relief of 50% (up to £110,000) introduced in 2022/23. The rate multiplier will also be frozen for 2022/23.
From 2023 a new rates investment relief will be available. This will ensure qualifying property improvements do not result in higher rates liability for a year following improvements. This is to support investments in green technologies and improvements to productivity.
Recovery Loan Scheme
This is to be extended until 30 June 2022 for SMEs. It will be capped at a finance level of £2m per business with the government guarantee decreasing from 80% to 70%. This scheme is in place to replace the Bounce Back and Business Interruption loans.
Apprenticeship funding
For employers who do not pay the Apprenticeship Levy, the government will continue to meet 95% of the apprenticeship training costs. The £3,000 apprenticeship cash incentive has also been extended to 31 January 2022.
Making Tax Digital (MTD)
MTD for Income Tax Self-Assessment (ITSA) is to be introduced from 6 April 2024. This will impact sole traders and landlords with income over £10,000. Partnerships will not be required to join MTD until 6 April 2025.
VAT
The VAT registration threshold remains at £85,000 and the VAT deregistration threshold remains at £83,000. This will not change for a further two years from 1 April 2022.
For the hospitality sector, the reduced VAT rate of 12.5% ends on 31 March 2022. It will revert to the standard rate of VAT from 1 April 2022.
Losses
There is now more flexibility when carrying back losses for companies. Losses incurred by companies for accounting periods ending between 1 April 2020 and 31 March 2022, and for individuals for trade losses of tax years 2020/21 and 2021/22, can carry back their losses over three years.
Cross-Border Group Relief (CBGR) and other related loss reliefs have been removed as of 27 October 2021.
Annual Tax on Enveloped Dwellings (ATED)
ATED is an annual tax that is payable mainly by companies that own UK residential property valued at over £500,000. This charge is continuing to increase in line with inflation.
Self-Employment Tax
Self-Employment Income Support Scheme (SEISS) and other support
Amounts that have been received through support schemes are identified as taxable income and is required as a separate entry on tax returns.
Employment Tax
Tax rates
There are no changes to income tax rates and these rates are believed to remain frozen until April 2026.
Inheritance tax thresholds will also remain frozen at £325,000 and it is planned for this to be the case until 2026. The residence nil-rate band for deaths in 2020/21 is £175,000 and it will stay at this for subsequent tax years to 2026.
National Insurance
From April 2022 the rate of National Insurance contributions will change across all classes (except class 2 and 3) for one year. It is set to increase by 1.25%. This will be spent on the NHS and social care across the UK. The increase will apply to Class 1 (paid by employees), Class 4 (paid by self-employed) and secondary Class 1, 1A and 1B (paid by employers). National Insurance contributions will return to the original rates from 2023/24 onwards, when the 1.25% charge becomes the Health and Social Care Levy.
Employment allowance
The employment allowance provides relief for employers from their obligation to pay employers NIC. Employers with an employer NIC bill below £100,000 in the previous tax year will still receive an allowance of £4,000.
Pensions
As of 6 April 2028, the earliest age most pension savers will be able to access their pension without incurring an unauthorised payments tax charge will be 57. This has changed from being 55. The lifetime allowance will also remain at its current level of £1,073,100 until April 2026.
Capital Gains Tax
The annual exempt amount for capital gains tax (after personal allowance) remains frozen at £12,300 for individuals and £6,150 for trusts.
As of 27 October 2021, instead of residents and non-residents having 30 days after the completion date to report and pay CGT after selling UK residential property, they now have 60 days to do this. This is in the hope that it gives the taxpayer sufficient time to report and pay CGT.
Entrepreneurs’ Relief
The lifetime allowance remains at £1m for qualifying disposals.
Personal Tax
Personal allowance
The personal allowance will remain at £12,750.
Dividend allowance
The tax-free dividend allowance will remain the same at £2,000. Dividends received above the allowance will be taxed at the following rates:
- 75% for basic rate taxpayers.
- 75% for higher rate taxpayers.
- 35% for additional rate taxpayers.
From April 2022, if the directors loan account is overdraw, the rate will also increase from 32.5% to 33.75%.
Interest relief for Landlords
For the year to 5 April 2020, 25% of finance costs will be allowed in full with the remaining 75% being allowed at a basic rate. This then changes for the year to 5 April 2021 when 100% of finance costs will be allowed at a basic rate.
Powers
There are now new powers which will allow HM Treasury to make temporary modifications to support taxpayers after a disaster or emergency of national significance. These modifications include exempting benefits in kind and specified reimbursements or providing relief for specified expenses.
As with any new tax legislation, each case needs to be looked at individually to determine the outcome. If you wish to discuss any of the above, please do not hesitate to contact the team at Spirare Limited.