Autumn Budget 2021 – Our Initial Views

The Chancellor, Rishi Sunak, delivered his second Budget of 2021 earlier today. Setting the tone for his “new age of optimism”, the Budget had a number of giveaways but contained very little in the way of changes to UK taxation.

Further detailed analysis will follow in the coming days, but the key points include:

R&D

The government set-out its continuing commitment to “Unleashing Innovation” in the UK.

Whilst the rates of the R&D Tax Reliefs remain unchanged, technology companies will be able to claim for expenditure incurred on Cloud and Data services incurred for their R&D.

More broadly, changes will be made to refocus the reliefs towards innovation in the UK from overseas, whilst generally improving compliance surrounding the scheme. Further details will be announced in the autumn.

Capital Gains Tax

Perhaps of most interest was that no changes were announced to the main rates of CGT (or IHT).

However, there was a welcome extension to 60 days (from 30 days) for sellers of a residential property to report the disposal to HMRC and pay any subsequent capital gains tax.

Duties

The main announcements came in the format of duties. The planned fuel duty increases are frozen (again) and the duties on alcohol will be frozen and then simplified, making the cost of a pint of beer or cider cheaper than they currently are, as well as a bottle of Prosecco!

Corporation Tax

As previously announced, but of interest to companies, the rate of Corporation Tax remains due to increase to 25% from April 2023.

Capital Allowances

The Annual Investment Allowance (AIA) of £1m had been due to reduce to £200k from 1 January 2022, but this will no longer happen, and the limit will continue to be £1m up to 31 March 2023 (in line with the Super Deduction).

This will allow businesses to write off qualifying capital expenditure up to £1m pa against profits.

Business Rates

A raft of changes was announced to Business Rates, including a 50% reduction (up to £110k) for businesses in the leisure and hospitality sectors, together with more regular reviews.

NIC and Pay

As had already been announced, NIC rates will increase by 1.25% from April next year, for both employers and employees. The National Living Wage will also increase to £9.50 from April 2022.

Dividend Tax Rates

Again, as previously announced, the rates of tax on dividends will increase by 1.25% from next April, to mirror the increase in NIC.

Basis Period Reform

Announced previously, basis periods for the self-employed are to be reformed and brought into alignment to 5th April, with a transitional year in 2022-23.

This has now been pushed back, with the transitional year taking place in 2023-24 and the new rules coming into force on 6 April 2024.

Our initial thoughts about the Budget

Other than the above, there were very few changes announced in terms of taxation. There has been much commentary over the last 18 months that taxes will need to rise to pay for the COVID pandemic, so time will tell whether future Budgets will include tax hikes.

What was clear from today’s Budget was that Mr Sunak is willing to use the new-found freedoms as a result of Brexit to change and tweak UK’s fiscal environment, paving the way for future changes.

As always, our team is happy to discuss any concerns or queries you have relating to the Budget, whether for you or your business. Please contact us today and we'll be happy to help,