The Autumn Budget 2021 – for a post-Covid economy.
27th October 2021
The Autumn Budget 2021 – The budget for a post-Covid economy!
Budget day is no longer the highly secret affair it used to be of years past. The Chancellor Rishi Sunak regularly leaks announcements ahead of the Budget so as to remove the criticism of announcing bad news on the day! Well today he was told to stand in the corner by the Deputy Speaker of the House of Commons for talking too much before class!
What a wonderful job the Treasury’s marketing and PR team have done, all the large tax rises leaked well before the Budget so that they have disappeared from the news by the time the Chancellor takes the stand on Budget Day.
The Chancellor tells us that “Employment is up, investment is growing, public services are improving, public finances are stabilising and wages are rising.” Is this experienced outside of Whitehall?
This was a Budget about good news and PR! The Chancellor announced that the UK is growing at a higher rate than he had previously budgeted for and therefore that paved the way for a multitude of spending announcements.
Apparently, education spending will go back to levels not seen since 2010! So, after cutting spending over the term of their leadership, the Chancellor shouts from the roof tops that we are now at the levels they inherited, not sure you should be shouting about that!
Another Spin… After cutting the funding for an existing initiative called Sure Start which has centres around the country giving new parents help and advice on child and family health, parenting, money, training and employment. The government has announced a new £300m programme to support families called ‘Start for Life’, this will offer high-quality parenting programmes, along with tailored services to help with perinatal mental health. There will also be funding to create a network of family hubs around the country. A rose by another name still has thorns!
Spending on health will increase by £4.2bn in cash terms over this parliament, wasn’t it estimated that the increase in NIC and the new Social Care Levy would raise £12bn per year? The Chancellor must have already spent £8bn or lost it behind the PM’s new Ikea sofa.
Let’s not forget those tax rises that have previously been announced but are yet to take effect, no mention of any of these during the Chancellor’s speech:
The rate of Corporation Tax will increase from 1 April 2023 from the current rate of 19% to 25%.
There was relief in the announcement for small businesses with the introduction of the small profit rate of 19% for businesses making profits of less than £50k.
It will not be a cliff edge drop for businesses that make more than £50k profit per annum, there will be a tapered rate between 19% and 25% for businesses making profits of between £50k and £250k.
National Insurance Contributions (NIC)
On 7 September it was announced that NIC paid by both employed and self-employed workers will increase by 1.25% from 6 April 2022.
Employers will be subject to a Social Care Levy of 1.25% on top of their existing Employer’s NIC burden from 2023/24.
All rates of tax on dividend income will increase by 1.25% from 6 April 2022.
|Basic Rate Taxpayers||Higher Rate Taxpayers||Additional Rate Taxpayers|
|Dividend Tax Rates for 2021/22||7.5%||32.5%||38.1%|
|Dividend Tax Rates for 2022/23||8.75%||33.75%||39.25%|
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Universal Tax Credits
Those that are in receipt of Universal Tax Credit are penalised for every pound that they earn beyond £293 per month! dis-incentivising them from seeking to work. It is astounding that the Chancellor makes a song and dance over a reduction in the current taper rate of 63% by 8% to 55%. This reduction will be effective from 1 December 2021. This rate is higher than the marginal rate of tax paid by those earning over £150k per annum!
The minimum wage for those aged over 23 has been raised from £8.91 per hour to £9.50 per hour.
An extra £170m will be given to child care providers.
The 8% surcharge on bank profits will be reduced to 3% from April 2023. This is paid by banks on top of the corporation tax that they pay on their profits. The annual limit before smaller banks pay this surcharge is increased from April 2023 to £100m in order to encourage small challenger banks.
The £1m Annual Investment Allowance has been extended to March 2023. It was previously due to end in Dec 2021.
Residential Property Developer Tax
From April 2022, UK residential property developers with profits of over £25m per year will pay an extra 4% tax to fund repairs to unsafe buildings.
Research & Development (R&D) tax relief reform
From April 2023 reforms of the relief will take place which will include relief on qualifying expenditure on data and cloud based costs. The reforms will also target the relief to money spent on R&D within the UK as opposed to being undertaken overseas.
Air Passenger Duty
Ahead of the COP 26 Climate Change Conference it comes as a surprise that the Chancellor chose to reduce Air Passenger Duty on flights between airports in England, Scotland, Wales and Northern Ireland rather than concentrate his efforts on more environmentally friendly options such as train travel.
The planned rise in fuel duty will be cancelled because of the high fuel price currently suffered by families and small businesses.
Lorry drivers have finally been recognised as key-workers and the government has now committed to investing in facilities for drivers at lorry parks.
The suspension of HGV levy will be extended until 2023.
A tonnage tax will reward those companies that adopt the UK’s merchant shipping flag.
£5bn is being committed to local roads maintenance. £2.6bn is being committed to more than 50 local road upgrades.
Sparkling wine is no longer the preserve of the rich the Chancellor tells us with his reforms of the Alcohol Levy with the principle being the higher the alcohol content the higher the charge.
The duty on sparkling wine will be cut to the same levels as those for still wines of the same strength.
Rose, fruit ciders, liqueurs, lower alcohol beers and wines will pay less duty.
There is a 5% cut in the duty on draught beer and cider in order to support pubs.
There will be a new “small producer relief” helping craft producers of less than 8.5% alcohol by volume (ABV).
The planned increase in duty on spirits, wine, cider and beer will be cancelled from midnight tonight.
In support of theatres, orchestras, museums and galleries to recover from COVID tax reliefs will be doubled till April 2024.
If you want to find out more about how the budget will impact you and your business please contact us.