The Chancellor, Rishi Sunak, delivered the Autumn Budget on 27 October 2021. The key announcements are summarised below.
- The 1.25% Health and Social Care Levy will be introduced from 6 April 2022 via an increase to National Insurance Contributions, before becoming a freestanding levy from 6 April 2023.
- From 6 April 2022, the dividend tax rates will also be increased by 1.25%. The basic rate dividend tax will increase to 8.75%, the higher rate dividend tax will increase to 33.75% and the additional rate dividend tax will increase to 39.35%. No increases or changes to the main or savings income tax rates.
- No increases to capital gains tax and inheritance tax rates or allowances. No changes to reliefs, including APR and BPR.
- The 30 day time limit for reporting capital gains on the sale of residential property and for payment of the tax has been increased to 60 days from Budget day.
- The income tax limits and personal allowance will remain at their current level until April 2026.
- The SDLT nil rate band for property purchases reverted to £125,000 from 1 October 2021.
- The taper rate in Universal Credit will reduce from 63p to 55p and work allowance increased to £500.
- National Living Wage will increase to £9.50 an hour from 6 April 2022.
- Basis period reform is expected to commence from 6 April 2024, with a transitional year before this.
- This is a major change expected to raise an additional £820 million in the first full year.
- The main rate of corporation tax will remain at 19% until April 2023. From this date the main rate will increase to 25%, with a Small Profits Rate of 19% for profits not exceeding £50,000. There will be marginal relief for profits between £50,000 and £250,000 (these thresholds are proportionately reduced for the number of associated companies and short periods). Close investment holding companies, including most family investment companies, will not qualify for the 19% rate.
- Between 1 April 2021 and 31 March 2023 (extended in the Budget from 31 December this year), expenditure on new plant and machinery qualifies for a 130% super-deduction. Expenditure on assets in the special rate pool (such as integral features in buildings and certain cars) will benefit from a 50% first year allowance.
- The £1 million annual investment allowance (AIA) limit for expenditure on plant and machinery will be extended until 31 March 2023.
- From April 2023, Research & Development (R&D) Tax Relief will be extended to include data and cloud accounting costs. Plans to target abuse and improve compliance will be published later in the Autumn.
- From 1 April 2022, Residential Property Developer Tax will be introduced at 4% for businesses with profits over £25 million.
VAT and indirect taxation
- VAT registration threshold will remain at £85,000 until 31 March 2024.
- The bank surcharge will be cut from 8% to 3% for banks with revenue over £25 million. For challenger banks, this limit is £100 million.
- 50% business rate discount for companies in the retail, hospitality and leisure sectors, up to a maximum of £110,000.
- Alcohol, fuel and vehicle excise duty rates have been frozen.
Air passenger duties will be reduced by 50% for domestic flights from 1 April 2023.
- 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.
- Draught Relief and Small Brewers’ Relief will be introduced to encourage small scale brewers and pubs.
The Chancellor took the opportunity to announce in his speech that his goal is to reduce taxes by the end of this parliament – however, with furlough having ended in September, the government needs to pay for the costs of the pandemic. The introduction of the pre-announced Health and Social Care Levy and increase in dividend tax rates will help raise revenues, but other than this, there were no major tax changes on the day and more focus was given to spending.