The Chancellor, Mr Sunak, has just delivered the Autumn 2021 Budget, a lot of which had been announced in advance. We outline the key points and takeaways below.

What did we already know?

National Living Wage

There are two “minimums”, the National Minimum Wage and the National Living Wage. The National Living Wage is what all workers should receive if they are aged over 23.

It’s been announced that the National Living Wage will increase from £8.91 per hour to £9.50, to come into effect from 1 April 2022. This is a 6.6% increase in the minimum wage for all those aged 23 and over – more than twice the current 3.1% rise in the cost of living.

National insurance

You will recall that, unusually,  Mr Johnson himself already announced some changes to national insurance pre Budget.

 The announcement heralded a general increase in national insurance of 1.25%, starting next April 2022, generally across the board but with a few exceptions as follows:

  • It applies to class 1 national insurance (paid by employers and employees)  and also to class 4 national insurance (paid by the self-employed)
  • It does not however apply to class 2 national insurance (another tax paid by the self-employed) nor to class 3 national insurance (paid voluntarily).
  • The extra national insurance will NOT apply to pension income
  • However it will apply to the earnings of those over pensionable age who otherwise would have been exempt from payment by virtue of age.

 And, of course, to make sure that those taking their remuneration by way of dividends also pay, there was the related announcement that tax on dividends would increase by 1.25% from the same date. So basic rate tax on dividends in excess of £2000 will rise to 8.75% (from 7.5%), higher rate tax on dividends will increase to 33.75% (from 32.5%).

What was announced today?

 Well, it took a long time for him to get to any detail.

He ran through some ambitious investment and spending plans against an economic background in which he said the UK was recovering faster than our major competitors. He pointed out the background of 3.1% inflation in September and the forecast that inflation will average 4% over the next year. This has been caused by disruption in the supply chain, and by global demand for energy at a time when supplies were already disrupted. It will take time to put this right. The office for budget responsibility, the OBR, has forecast the economy will return to its pre-Covid activity level at the turn of the year. He advised that the OBR growth forecast has been increased from 4 to 6.5% for the current year. Overseas aid will be back to 0.7% by the end of the Parliament. Borrowing is forecast to fall.

Below, we’ve summarised some of the specifics announced in the Autumn 2021 budget.

Capital gains tax (CGT)

There was speculation before the Budget that Mr Sunak might align the rates of income tax and CGT.

No announcements were made – however, a relief to those selling assets at the moment.

Research and Development tax relief

The relief was changed in two ways:

  • It now covers cloud accounting and data costs
  • From April 2023, investment will be focused on domestic activity rather than the cost of activity being carried out abroad

Air passenger duty

For flights within the UK, air passenger duty will be halved.

Corporate tax

In the March Budget, the increase to 25% in 2 years’ time was announced. The new super deduction was also introduced and the AIA was extended to December this year.

He announced that the £1 million AIA will not end as previously planned in December 2021, but will continue until March 2023.

The bank surcharge will be retained at 3%.

Business rates

From 2023 there will be a revaluation every 3 years

Businesses will be able to make improvements to their properties from that date, 2023, and pay no extra rates for 12 months.

The planned increase in the multiplier due next year will be cancelled.

There will be a 50% discount for businesses in the hospitality sector.

Alcohol duties

A radical simplification was introduced.

The present 15 rates will reduce to just 6. Stronger alcohol will have higher rates. Lower strength alcoholic drinks will pay less.

Sparkling wines will now pay the same duty as still wines.

Cider will pay less as well.

He also announced draught relief – a new lower rate of duty on draught beer and cider. The duty is being cut by 5%.

These reforms come in with effect from February 2023 and the planned increases that were to be introduced will be cancelled with effect from midnight tonight.

Fuel duty

The planned rise is being cancelled.

Public sector workers

There will be a return to the normal pay review processes.

Taxes

The Chancellor said he wanted tax rates to be going down by the end of the Parliament.

Universal credit

The 63% taper which applies to the benefits of claimants who start work will be cut by 8% to 55%.

This measure is being introduced no later than 1 December 2021.

Hopefully this outline of the Autumn 2021 Budget has been useful. As always, if you have any queries, please contact us.