The Budget on 27 October 2021 was Chancellor Rishi Sunak’s third, but – now that the shadow of Coronavirus is decreasing (we all hope) – it was in many ways the first ‘non-emergency’ Budget for both him and the current government. In his speech he set out their plans to “build back better” with ambitions to “level up” and reduce regional inequality.
Two large increases in tax had previously been announced – in Corporation Tax and the new Health and Social Care Levy – so in his Budget the Chancellor spent more time making new spending announcements (some briefed to the press in the preceding few days) than talking about tax. He was helped by favorable revisions in the forecasts of the Office of Budget Responsibility, principally due to a reduction in their estimate of the long-term scarring effect of Coronavirus on the economy, now expected to only be about 2% of GDP (as the OBR also noted, this is less than their estimate of the negative impact of Brexit on long run GDP of 4%). Even after all the announced increases, the Institute for Fiscal Studies has pointed out that most departments will still have lower spending in real terms than they did in 2010, so how much of a real benefit we will see remains uncertain.
As usual, as well as changes announced yesterday, our summary includes measures previously announced, but only coming into effect from April 2022 or later. These include:
Personal and Employment Taxes
- Income Tax – the personal allowance and basic rate band for Income Tax both increased slightly for 2021/22 but are now frozen until 2025/26.
- Health and Social Care Levy – new 1.25% levy on employment income from April 2022 (operating in the first year as an increase in National Insurance Contributions), payable by both employees and employers.
- Taxes on dividends – also increase by 1.25% from April 2022.
- Pensions – increase in the earliest age from which most pension savers can access their pension savings without incurring a tax charge to 57, from April 2028.
- Making Tax Digital for income tax postponed by one year to 6 April 2024.
- Corporation Tax (currently 19%) – as announced in March 2021 this will increase to 25% from April 2023 for companies with profits over £250,000.
- £1 million annual investment allowance retained until 31 March 2023.
- New temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022/23.
- New Residential Property Developer Tax from 1 April 2022.
- Capital Gains Tax annual exemption and Inheritance Tax nil-rate band continue to both be frozen until April 2026.
- Individuals disposing of UK property on or after 27 October 2021 now have a 60 day CGT reporting and payment deadline, following the completion of the disposal (previously 30 days)
- Complete overhaul of alcohol duties that will see drinks taxed on their strength.
- Cancellation of the previously announced rise in fuel duties.
- Pubs supported with a reduction in draught beer and cider duty.
- Increases in the National Living Wage and the National Minimum Wage rates.
- Universal Credit taper rate reduced from 63% to 55%.
- New ultra-long-haul band of air passenger duty introduced.
If you have any questions regarding the information covered in this summary, or would like advice on a particular area, please get in touch with either your usual contact or any of the UNW Tax partners. Contact details can be found on the final page of this summary PDF.