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The Autumn Budget 2021

Sarah Hamilton - November 19th, 2021

The Chancellor’s Budget on 27 October 2021 did appear to be a public sector spending spree. Over the last 18 months we have experienced a huge economic shock as a result of the pandemic, with massive levels of financial intervention from the Government to support our economy and public welfare. In the Chancellor’s own words he believes we are entering an “age of optimism” with the hope that prosperity will be driven by investment in both the public and private sector.

To this end, it was announced  that the £1 million Annual Investment Allowance (AIA) is extended to March 2023 (instead of ending in December 2021). This is welcome news, especially for the larger unincorporated businesses with a high level of capital expenditure, as it levels the disparity that was looming between limited companies (who are entitled to claim the super deduction allowances) and the bigger unincorporated businesses such as Farming Partnerships who have to rely on the AIA.

For those involved in innovation , including research and development, there are enhanced reliefs (and increased funding available via Innovate UK). If you participate in researching cloud computing and data it is intended that this will be qualifying expenditure for R & D.

We are very mindful of the significance of both the Plant and Machinery Allowances (such as AIA and Super Deduction) and the R & D Allowances and R & D  Tax Credits and will work with our clients aiming to optimise claims.

Business Rates are set to be reduced for those in retail, hospitality and leisure sectors including a 1 year discount of 50%. There are to be more frequent revaluations (every 3 years from 2023) and relief for adopting solar panels, and a 12 months rates holiday on property improvements.

For individuals selling residential property there is an extension to the window for reporting  and paying Capital Gains Tax – with immediate effect for transactions on or after the Budget date the deadline is 60 days, up from 30 days, after completion.  Many have felt this extension is needed as the 30 day requirement was challenging.

The National Living Wage increases from 01/04/22 from £8.91 to £9.50 per hour – a 6.6% increase.

There were changes to alcohol duty – the emphasis being on “simpler, fairer and healthier” – the winners here seem to be English sparkling wines and draft beer/lager.

The arts, museums, entertainment and culture sectors will be pleased that the covid support and recovery Creative Tax Reliefs have been increased and extended.

Not so evident in the Chancellor’s speech on Budget day, but impending tax increases and changes of which we are already aware :–

  • an increase of 1.25% in dividend tax with effect from April 2022
  • Corporation Tax increases from 19% to 25% from April 2023 (on profits over £250,000 per annum – no change for those with profits below £50,000 and a tapered increase for profits between the two figures)
  • NIC increases – the Health & Social Care levy increases both employee and employer contributions by 1.25% from April 2022
  • And to keep us tax advisers on our toes, for any unincorporated businesses with a non 31/03  or 05/04 year end, their taxable income for the tax year ending 5/4/24 will be from the end of the accounts period assessed in 2022/23 all the way through to 5/4/24, with overlap relief and some transitional provisions. We shall be contacting all of our clients affected by this change individually.

As always, we encourage  contact from our clients if there are any aspects you would like to discuss.

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