With significant tax changes already announced in the March Budget, and further rises introduced by the Health & Social care levy we were hoping for a fairly quiet budget here at Raw.
Despite speaking for over an hour, the Chancellor did not announce any fundamental changes to the corporate, personal or indirect taxes in this Autumn Budget.
But it wouldn’t be a Budget without a few surprises, and there is good news for the beer, wine and cider drinkers amongst us.
Here we round up the latest from the Autumn Budget 2021 and bring you the key reminders from the previous announcements earlier in the year.
Business Taxes
New: Annual Investment Allowance extended
Currently the Annual Investment Allowance (AIA) is set at £1 million meaning you get immediate tax relief on new plant and machinery up to this amount each year.
That £1 million allowances was set to fall to £200,000 on 31 December 2021. However, the Chancellor announced an extension to the £1 million allowance until 31 March 2023.
This extension is to promote business investment in to plant and machinery and will benefit those with significant capital expenditure budgets over the next 18 months.
New: Changes to R&D tax regime from April 2023
Research & Development (R&D) is a tax regime which promotes investment in to new and innovative systems and technology.
The regime provides up to 130% additional deduction for small companies undertaking qualifying R&D.
The Autumn Budget included two significant announcements which will apply from 1 April 2023:
- The cost of data and cloud computing will now qualify for R&D tax purposes.
- A targeted set of measures aiming at restricting or preventing overseas costs being included in UK R&D claims.
Already Announced: Corporation tax to increase to 25%
In the March Budget, the Chancellor announced an increase to the headline rate of corporation tax to 25%.
The headline rate will apply for those with profits over £250,000 and will take effect on 1 April 2023.
Companies with profits below £50,000 will continue to be taxed at 19%.
For those with profits between £50,000 and £250,000, marginal relief will be available meaning the tax rate suffered will be between 19% and 25%, depending on the profits.
Already Announced: Other measures
Two other corporate tax reliefs worth a mention are:
These rules enable businesses to carry back losses arising in 2020/21 and 2021/22 up to three years.
They were introduced to provide flexibility as businesses recover from the pandemic.
These rules apply from 1 April 2021 to 31 March 2023.
This provides 130% first-year allowance for capital expenditure on qualifying plant and machinery.
Some exclusions apply including expenditure on cars.
These rules apply from 1 April 2021 to 31 March 2023.
Personal Taxes
Already Announced: Dividend Tax Rate
From 6 April 2022 the dividend tax rates will increase across the board by 1.25%.
These rules were announced in September as part of the Health and Social care levy.
Individuals will still receive a tax-free dividend allowance of £2,000 per year.
New: Disposals of UK residential property deadline extended
Currently, where a UK resident disposes of UK residential property they must submit a return within 30 days and pay the capital gains tax (CGT) due.
From 27 October 2021, the timeframe to report and pay the CGT has been extended from 30 to 60 days.
The requirement to file a return only applies where there is a CGT liability, so this is not relevant to those selling their own homes which fully qualify for Private Residence Relief.
Employer Taxes
Already Announced: National Insurance rises
As part of the Health & Social Care Levy, the Chancellor increased employees and employers National Insurance Contributions (NIC) by 1.25%.
These rules will apply from 1 April 2022 and on 1 April 2023 will be replaced by a social care levy equal to the same amount.
New: National Living Wage
The National Living Wage (NLW) will rise to £9.50 from 1 April 2022, an increase of 6.6%.
The National Minimum Wage for Apprentices and those under the age of 23 will also see rises of between 4.1% and 11.9%.
It is clear that alongside NIC rises this is expected to result in a higher wage bill for employers in the short term.
New: Extension to low benefit in kind rate for electric cars
We’ve shouted about the tax benefits of electric cars for some time.
In the Autumn Budget, the Chancellor confirmed that the low benefit in kind rate for company cars will be extended until 5 April 2025.
This means fully electric vehicles, or those with less than 50 g/km and an electric range of more than 130 miles will result in a benefit in kind tax rate of 2%.
This is an important announcement as it provides business owners with some certainty that the low rate is not going to be withdrawn any time soon.
Other announcements
- Changes to business rates and some welcome cuts for those in the retail, hospitality and leisure sectors to aid recovery.
- Alcohol duty is to undergo substantial reform. This will tax drinks in line with their alcohol content. In the Chancellors speech he acknowledged this would lead to a price rise for high strength cider and fortified wine but reduce prices for fruit ciders, rose, sparkling wine and prosecco.
- Air passenger duty from domestic flights is to be reduced. This is to encourage flights between regional UK airports. Meanwhile, a new ultra-long-haul duty will be introduced for flights over 5,500 miles.
- A reduction to the taper for those working and receiving universal credit. This will reduce the effective rate of tax from 63% to 55%.
Wrapping up
With two budgets and the Health & Social Care levy all announced this year the Chancellor has certainly been busy. Most businesses will welcome the fairly light touch approach in this Autumn Budget as they plan for 2022 onwards.
If you’ve got any questions on the tax changes introduced this year then do get in touch with us here at Raw.
