At lunchtime today, we saw Rishi Sunak, Chancellor of the Exchequer, set out the Government’s 2021 Autumn Budget and Spending Review.
Despite the flurry of announcements from the Chancellor’s office over the last few days, there was still considerable ground to cover in his speech today.
Mr Sunak acknowledged that he was looking towards a “new economy post Covid”, but there were, nevertheless, challenging months ahead. Not least that we have to recognise the global problem of rising inflation; a result of increasing global demand for goods that cannot be met quickly as the world’s economies re-start and the demand for energy places a strain on its prices.
Such inflationary influences will take months to ease and are not unique to the UK. Inflation in September was 3.1% and is likely to rise by an average of 4% over the coming year; but on the bright side, the OBR confirmed that the UK economy is forecast to return to pre-Covid levels by 2022. Annual growth is also set to rebound by 6.5% this year, followed by a further 6% growth in 2022
Borrowing as a percentage of GDP is also forecast to fall from 7.9% this year to 3.3% in 2022, which will then continue to fall during the following four years to 1.5%.
As always, here is our rundown of the key highlights announced:
- A six-month extension to the COVID recovery loan scheme to June 2022.
- Business Rates reforms that include:
- Freezing the business rates multiplier for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p
- Introducing a new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap.
- Introducing a 100% improvement relief for business rates. This will provide 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value.
- Increasing the frequency of business rates revaluations so that they take place every 3 years instead of every 5 years, starting in 2023.
- Extending transitional relief for small and medium-sized businesses and the supporting small business scheme for 1 year. This will restrict bill increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000), subject to subsidy control limits.
- Extension to the Annual Investment Allowance of £1million from the December 2021 deadline to 31 March 2023.
- A £20bn investment in R&D by 2024-25, with further details to be revealed in the Government’s forthcoming whitepaper. R&D reliefs will be expanded to include data and cloud costs with effect from April 2023.
- The Health and Social Care Levy to be introduced from April 2022. A new 1.25% Health and Social Care Levy (“the Levy”) will fund an historic investment in the NHS and social care. NICs for working age employees, self-employed people and employers will increase by 1.25% and be added to the existing NHS allocation.
- Dividend rates: As announced by the Prime Minister on 7 September 2021, legislation will be introduced in the Finance Bill 2021-22 to increase the rates of income tax applicable to dividend income by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75%, and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate. The changes apply UK-wide and will take effect from 6 April 2022.
- Residential Property Developer Tax (RPDT) to be introduced from April 2022 on the profits that companies and corporate groups derive from UK residential property development. The tax will be charged at 4% on profits exceeding an annual allowance of £25million.
- National Living Wage will increase to £9.50 from April 2022, which equates to an extra £1,000 a year for a full-time worker.
- A five-step plan to overhaul Alcohol duty:
- Cutting main duty rates from 15% to 6%, with the new duty aimed at working on the basis of the higher the alcohol level, the higher the rate of tax.
- Introduction of a small producer relief, so to reduce the tax burden on smaller producers of wine, cider, spirits and made-wine below 8.5% ABV.
- Similarly, a 5% reduction on the rate of duty on draught beer and cider.
- No increase of duty on spirits such as Scotch whiskey.
- End the duty premium on sparkling wine.
- The Government will freeze Fuel duty UK-wide in 2022-23. This is the 12th consecutive year of the freeze, cumulatively saving the average UK car driver £1,900 compared with the pre-2010 escalator.
- Vehicle Excise Duty (VED) rates for heavy goods vehicles (HGVs) will remain frozen in 2022-23, and the HGV Levy will be suspended for another 12 months from August 2022, in order to support the haulage sector
- Air Passenger Duty on UK domestic flights to be reduced by 50%.
- Universal Credit taper rate is to be cut by 8% from 63% to 55%, which is set to be introduced “no later” than 1 December.
Greater detail is contained within the 200-page Spending Review, however, it is a broad brush view and in many instances, there will be greater detail issued over the coming months: https://www.gov.uk/government/publications/autumn-budget-and-spending-review-2021-documents
Before sitting down, the Chancellor explained that “this Government chooses to invest and build a stronger economy for the future. We’re unleashing the dynamism and creativity of British businesses with a simpler, fairer, more competitive tax system. By the end of this parliament, I want taxes to go down, not up.”
We can all raise a marginally cheaper glass of alcohol to that prospect!!
If you have any queries about how the Budget may affect you, contact your local Champion office.