October 2021 Budget – What You Need To Know!

Chancellor Rishi Sunak presented his 2021 Budget on Wednesday 27th October 2021. The key announcements are summarised below;

Businesses

• The main rate of corporation tax will remain at 19% until April 2023. From this date the main rate will increase to 25%, with a Small Profits Rate of 19% for profits not exceeding £50,000. There will be marginal relief for profits between £50,000 and £250,000 (these thresholds are proportionately reduced for the number of associated companies and short periods). Close investment holding companies, including most family investment companies, will not qualify for the 19% rate.
• Between 1 April 2021 and 31 March 2023 (extended in the Budget from 31 December this year), expenditure on new plant and machinery qualifies for a 130% super-deduction. Expenditure on assets in the special rate pool (such as integral features in buildings and certain cars) will benefit from a 50% first year allowance.
• The £1 million annual investment allowance (AIA) limit for expenditure on plant and machinery will be extended until 31 March 2023.
• From April 2023, Research & Development (R&D) Tax Relief will be extended to include data and cloud accounting costs. Plans to target abuse and improve compliance will be published later in the Autumn.

• No changes to income tax or CGT rates or allowances but deadline for reporting gains on residential property extended from 30 to 60 days for sales completed after budget day, This is good news for those clients who are in the process of a sale or planning to mitigate exposure to IHT;

• From 1 April 2022, Residential Property Developer Tax will be introduced at 4% for businesses with profits over £25 million.

• Tax relief for museums and galleries will be extended until March 2024 with immediate significant increases in cultural tax reliefs;
• Group relief for corporate losses arising in EEA subsidiaries abolished;
• A 6% increase in Diverted Profits tax from 2023/24.

Individuals

• The 1.25% Health and Social Care Levy will be introduced from 6 April 2022 via an increase to National Insurance Contributions, before becoming a freestanding levy from 6 April 2023.
• From 6 April 2022, the dividend tax rates will also be increased by 1.25%. The basic rate dividend tax will increase to 8.75%, the higher rate dividend tax will increase to 33.75% and the additional rate dividend tax will increase to 39.35%. No increases or changes to the main or savings income tax rates.
• No increases to capital gains tax and inheritance tax rates or allowances. No changes to reliefs, including APR and BPR.
• The 30 day time limit for reporting capital gains on the sale of residential property and for payment of the tax has been increased to 60 days from Budget day.
• The income tax limits and personal allowance will remain at their current level until April 2026.
  
• The SDLT nil rate band for property purchases reverted to £125,000 from 1 October 2021.
• The taper rate in Universal Credit will reduce from 63p to 55p and work allowance increased to £500.
• National Living Wage will increase to £9.50 an hour from 6 April 2022 for employees aged 23 years and over.

• Changes to basis periods for unincorporated entities effective for 2024/25 so regardless of the accounting date the business’s profit or loss will be that arising in the tax year, This is a major change expected to raise an additional £820 million in the first full year.
• No announcements on pensions lifetime or annual allowances;

VAT and indirect taxation

• VAT registration threshold will remain at £85,000 until 31 March 2024.
• The bank surcharge will be cut from 8% to 3% for banks with revenue over £25 million. For challenger banks, this limit is £100 million.
• 50% business rate discount, from 6th April 2022 to 5th April 2023, for companies in the retail, hospitality and leisure sectors, up to a maximum of £110,000.

Duties

• Alcohol, fuel and vehicle excise duty rates have been frozen.
• Air passenger duties will be reduced by 50% for domestic flights from 1 April 2023.
• In wide-ranging changes to the whole regime for duties on alcohol, higher strength alcoholic drinks will attract higher duties and lower strength drinks will attract lower tax rates.
• Draught Relief and Small Brewers’ Relief will be introduced to encourage small scale brewers and pubs.
• Vehicle excise duties set to rise on cars, vans and motorcycles from April 2022;

• The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688;