Yesterday saw the second Budget of 2021. Rishi Sunak’s alleged pre-speech ritual includes a Twix and a can of Sprite. But did it add any fizz?
As you’ll have noticed, many of Rishi’s spending plans have been heavily trailed in the media as being a budget to support a post covid recovery. Sound bites coming out of number 11 used phrases such as “a new economy” with the “levelling-up” agenda clearly running through it.
So did he deliver? Here’s our take on the areas most likely to be of interest to you. And if you really want to read the full Budget document you’ll find it here.
Capital Gains Tax
Once again it was a case of “no news is good news” for business owners and investors, as the Budget mentioned no plans to increase the rates of CGT.
One helpful change is that from 27 October 2021, the deadline for residents to report and pay CGT after selling UK residential property will increase from 30 days to 60 days. This also applies for non-UK residents disposing of property in the UK.
Corporation Tax
The current £1m Annual Investment Allowance (AIA) limit will be extended from 31 December 2021 until 31 March 2023.
The “super-deduction” rules have been clarified for situations involving leased properties and plant or machinery included within them.
The “Corporation Tax Surcharge” paid by banking groups will reduce from 8% to 3% from 1 April 2023, when the main rate of corporation tax increases from 19% to 25%. The surcharge allowance (the amount of profits that can be earned before the surcharge is applied) will be increased from the same date, from £25m to £100 million.
For international corporate groups – a new measure, having effect for company accounting periods ending on or after 27 October 2021, repeals legislation that permits UK companies in certain circumstances to claim group relief for losses incurred in the EEA.
Business Rates
The government will freeze 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.
Businesses with eligible retail, hospitality and leisure properties will also benefit from a new temporary rates relief for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap.
The government are also consulting on how best to implement a 100% improvement relief against business rates, which will take effect in 2023 and be reviewed in 2028. This will provide 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value.
Targeted business rate exemptions will also be introduced from 1 April 2023 until 31 March 2035, for eligible plant and machinery used in onsite renewable energy generation and storage. As well as a 100% relief for eligible heat networks, to support the decarbonisation of non-domestic buildings.
The frequency of business rates revaluations will be increased so that they take place every 3 years instead of every 5 years, starting in 2023.
Research & Development Tax Relief
We’re awaiting the finer detail, but it was announced that taxpayers will be able to include cloud computing and data costs in future R&D claims. This amendment will provide increased support for companies carrying out R&D in information technology, modernising the regime for today’s costs.
The Chancellor also announced measures to streamline the regime to target UK activities only from April 2023. This would prevent the scheme from funding overseas R&D activities through the use of UK companies. The exact terms of this new restriction will follow.
Other Creative Industry Tax Reliefs
Museums and Galleries Exhibition Tax Relief will be extended for two years until 31 March 2024.
The headline rates for Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibition Tax Relief will be increased from 27 October 2021, from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50%. From 1 April 2023, the rates will be reduced to 30% and 35%. They will return to 20% and 25% on 1 April 2024.
From 1 April 2022, changes will be made to better target these reliefs, and ensure that they continue to be safeguarded from abuse.
From 1 April 2022, production companies will be able to switch between claiming Film Tax Relief or High-End TV Tax Relief during production, ensuring that relief is not lost should a company decide to change their distribution method.
Residential Property Developer Tax
From April 2022, an additional 4% supplementary charge will be added to the corporation tax base of residential property developer companies, on group profits that exceed a threshold of £25 million. This surcharge will ensure that the largest developers make a fair contribution to help pay for building safety remediation, such as removing unsafe cladding.
Income Tax
As announced on 7 September 2021, the rates of income tax applicable to dividend income will increase by 1.25% from 6 April 2022. 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%.
Also previously announced, the complex basis period rules for income tax will be reformed. Sole traders’ / partnerships’ profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date, removing the need to charge tax on profits twice and the need for overlap relief. The date of this change has been pushed back in line with MTD (more below). The transition will now take place in 2023-2024, and the new rules will come into force from 6 April 2024.
MTD and Penalties
As announced on 23 September 2021, the government will give sole traders and landlords with income over £10,000 an extra year to prepare for Making Tax Digital (MTD) – the new key date is 6 April 2024. General partnerships will not be required to join MTD until 6 April 2025.
Also announced on 23 September 2021, the new penalties for the late submission and late payment of income tax will now come into effect on 6 April 2024 for taxpayers who are required to submit digital quarterly updates through MTD, and 6 April 2025 for all other self-assessment income taxpayers.
The new late submission and late payment penalties for VAT will still come into effect for VAT registered businesses from accounting periods starting on or after 1 April 2022, as announced at Spring Budget 2021.
National Minimum Wage and Universal Credit
On 1 April 2022 the National Living Wage for those aged 23 and over will rise by 6.6% to £9.50 an hour. Other National Minimum Wages rates that will apply from April 2022 are:
- an increase for 21 to 22-year-olds by 9.8% to £9.18 per hour
- an increase for 18 to 20-year-olds by 4.1% to £6.83 per hour
- an increase for 16 to 17-year-olds by 4.1% to £4.81 per hour
- an increase for apprentices by 11.9% to £4.81 per hour.
There will also be changes to Universal Credit which may positively impact you or your employees. By 1 December 2021, the government will reduce the taper rate that applies in Universal Credit from 63% to 55%, meaning working households keep more of every pound they earn. There will also be an increase of £500 a year, to the amount that households with children or a household member with limited capability for work can earn before their Universal Credit award begins to be reduced.
Pensions and Investments
There will be an increase in the minimum age to draw pension benefits to 57 from 55, effective from 6 April 2028.
No changes were announced to pension tax relief. The speculation that the Chancellor would bring pensions back into a charge to inheritance tax on death, failed to materialise.
The new NS&I Green Bond announced in the Spring 2021 Budget is now available. Funds raised from the bond will be used towards chosen green projects by the Government. The bond is a 3-year fixed term deposit, paying an interest rate of 0.65% gross per annum and is taxable. The minimum investment is £100, and the maximum £100,000 per person.
Fuel Duty and Vehicle Benefits
Fuel duty rates will remain frozen for 2022 to 2023.
From 6 April 2022, there will be increases to the van benefit charge and the car and van fuel benefit charges by reference to the September 2021 Consumer Price Index.
Other Indirect Taxes
Further amendments have been made to the Plastic Packaging Tax legislation that is due to begin from 1 April 2022. These changes are to ensure that the legislation reflects the policy intent regarding the design and administration of the tax.
As previously announced, from 1 April 2022 the standard and lower rates of Landfill Tax will increase in line with Retail Price Index (RPI), rounded to the nearest 5 pence.
Cocktails and cockpits
The government intends to reform alcohol duty so drinks will be taxed in proportion to alcohol content, and the duty rules will be simplified. A consultation will be published on the detail of these reforms, closing on 30 January 2022.
Regular domestic flyers will be pleased to hear of a 50% cut in Air Passenger Duty for flights between airports in England, Scotland, Wales and NI, effective from 1 April 2023.
From the same date, a new ultra-long-haul band of Air Passenger Duty of £91 will apply to flights of 5,500 miles or more.
Tax Avoidance Clamp Down
As previously announced, we will see further measures to clamp down on promoters of tax avoidance. New legislation set out in Finance Bill 2021-22, will:
- allow HMRC to freeze a promoter’s assets so that the penalties they are liable for are paid
- deter offshore promoters by introducing a new penalty on the UK entities that support them
- provide for the closing down of companies and partnerships that promote tax avoidance schemes
- support taxpayers to steer clear of avoidance schemes or exit avoidance quickly by sharing more information on promoters and their schemes.
So, to be honest, not much rising or falling in this Budget. However, as usual there are some key impacts on businesses and individuals. As ever, if you want to discuss anything, simply get in touch.
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