2021 Autumn Budget: What does it mean for you & your business?

On Wednesday (October 27th) the Chancellor, Rishi Sunak, delivered his 2021 Autumn Budget to the House of Commons.

With the economic outlook continuing to improve, and with lockdowns (hopefully) a thing of the past, this Budget – the second of the year – was an opportunity for Mr Sunak to make good on his promise to ‘move on from crisis-management mode’ following his first 18 pandemic-ravaged months in office.

After all, the economy is recovering faster than many of our contemporaries and borrowing is set to fall by more than 50% – from 7.9% to 3.3%.

However, the Chancellor still faced a plethora of challenges as he stepped up to the dispatch box on Wednesday lunchtime. A combination of Brexit and COVID-19 have ravaged supply chains. There are shortages in gas, energy, materials, and workers. Just this week, the CBI said that manufacturing costs in the UK are rising at the fastest rate in over 40 years. Inflation also continues to rise (projected to hit 4% next year), along with essential supplies like food and fuel, pushing up the cost of living and putting further strain on working families.

In the run up to the Budget, Whitehall departments had been asked to identify ‘at least 5% of savings and efficiencies from their day-to-day budgets’ to combat the financial challenges the government faces. This is something businesses up and down the country will have become all too familiar with over the last 18 months or so.

Somewhat comically, Mr Sunak also had his knuckles wrapped before delivering his speech, after much of the contents of his Budget were leaked to press sources before being put to the House. Statements setting out spending for transport, health and education had already been revealed earlier in the week, much to the ire of Commons Speaker, Sir Lindsay Hoyle. His frustration was echoed in the chamber by Deputy Speaker, Dame Eleanor Laing.

So, against this backdrop of uncertainty and following unprecedented levels of borrowing and national debt, what announcements did the Chancellor make, and how will what he said affect you and your business over the next 12 months?

We’ve taken a closer look at the 2021 Autumn Budget for you. Here’s your summary of what’s changing and how it could affect you.

Businesses

Following the tax cuts he announced back in March, one of the key messages in the 2021 Autumn Budget was the fact that business rates will largely remain the same. Mr Sunak stated that he thought it would be ‘wrong’ to extract £25bn in additional borrowing through further cuts or tax rises. Business rates will be re-evaluated more frequently – every three years – from 2023.

However, the Chancellor did announce a new 50% business rates discount for certain industries still reeling from the pandemic. Namely, retail, hospitality and leisure businesses. The tax cut, which will affect pubs, restaurants, cinemas, theatres, hotels and gyms, will allow eligible businesses to claim a discount on their rates of up to £110,000 a year. That’s a tax cut of almost £1.7bn, and represents the biggest single year tax cut in over 30 years.

Furthermore, some businesses have been granted their wish of an extension to the annual investment allowance. The allowance, introduced last year, means businesses can claim 100% of the cost of plant and machinery purchases up to the value of £1m. This was due to be cut to £200,000 but the £1m threshold will instead remain in place until 2023.

Mr Sunak also announced an extension to the Recovery Loan Scheme, with some notable caveats. Businesses can now only borrow up to £2m, rather than the previous £10m, with 70% (down from 80%) guaranteed by the government. The scheme was due to wind up at the end of December but has been extended to the end of June next year to give lenders the continued confidence to lend to small and medium-sized businesses.

Heeding calls from the Federation of Small Businesses, new investment relief will be introduced in 2023 to encourage business to adopt and invest in greener technology, such as solar panels. In addition, from 2023, all businesses will be able to make improvements to their property without paying extra business rates for 12 months.

And, to support businesses with their tax bills, a scheduled increase in the multiplier has been cancelled in a tax cut that Mr Sunak estimates will be worth £4.6bn over the next five years.

Elsewhere, £150m will go to the British Business Bank to encourage the development of regional angel investors in the devolved nations. Angel investors will be made available to help make people’s dreams of starting a business a reality.

The ‘Help to Grow’ scheme will also enable over 100,000 SMEs to boost their productivity through world-class management training and support for digital adoption.

And, a £1.4bn Global Britain Investment Fund will support some of the UK’s leading manufacturing sectors, stimulating regional growth.

Taxation

Most of the year’s major taxation announcements had already been made before the Budget.

In March, it was announced that Corporation Tax would increased from 19% to 25% from 2023, while significant changes to Income Tax rates and National Insurance contributions were announced more recently. Dividend tax was also increased by 1.25% last month to fund the new ‘health and social care levy’.

There was also no new changes to the level of Inheritance Tax or Capital Gains Tax rates.

So, what were the big tax changes revealed in the 2021 Autumn Budget?

Well, firstly, on the subject of Capital Gains Tax, the time limit for reporting and paying CGT on residential properties has increased from 30 days after completion, to 60 days. The payment window for non-resident landlords has increased in line with this.

And, as was announced in February, the government will introduce a new tax from next April on the profits that companies and corporate groups derive from UK residential property development. This should only impact larger-scale developers and ensure they make a fair contribution to help pay for building safety remediation. The tax will be charged at 4% on profits exceeding an annual allowance of £25m and will partly fund the £5bn investment in the removal of unsafe cladding from high-risk buildings.

The Universal Credit taper rate will be reduced by 8% from 63% to 55% in a tax cut worth over £2bn. This change will be introduced next month and will increase the amount that households with children, for instance, can earn before their Universal Credit award begins to reduce by £500 a year.

Bank surcharges within corporation tax will be retained at 3%. And, the overall corporate tax rate on banks will increase to 28%, from 27%, in 2023.

Amidst spiralling fuel costs, the levy on fuel duty will be frozen for a twelfth year on the spin. Fuel prices are currently at their highest level for nearly a decade, leading to the cancellation of the planned rise in fuel duty.

HGV levy had already been suspended until August, and has now been extended until 2023. And, Vehicle Excise Duty has been frozen for heavy goods vehicles.

However, despite soaring energy costs for struggling families, and amidst a crisis in the industry, VAT on household energy bills will NOT be cut, with prices expected to continue to rise into the New Year.

Elsewhere, domestic flights between UK airports will be subject to a lower rate of air passenger duty from 2023. This will halve air passenger duty costs for an estimated nine million people – and boost regional airports. The timing of this decision has raised eyebrows with the COP26 climate conference beginning this week but the government insists it will help the ailing aviation sector without harming the environment. To counteract these plans, a new band will be added to air passenger duty to cover long haul flights of more than 5,500 miles.

Wages

As we already knew, the National Living Wage will increase from April next year for all over-23s, from £8.91 per hour to £9.50 (a 6.6% rise). The 59p hourly boost will mean a full-time worker on the living wage will get a pay rise of more than £1,000 per year.

In total, the annual gross earnings of a full-time worker on the NLW has now increased by over £5,000 since it was introduced back in April 2016. The government has also accepted LPC recommendations for the other National Minimum Wage rate increases, as follows, to apply from April 2022:

  • The rate for 21 to 22 year olds will increase by 9.8% from £8.36 to £9.18 per hour.
  • The rate for 18 to 20 year olds will increase by 4.1% from £6.56 to £6.83 per hour.
  • The rate for 16 to 17 year olds will increase by 4.1% from £4.62 to £4.81 per hour.
  • The rate for apprentices will increase by 11.9% from £4.30 to £4.81 per hour.
  • The accommodation offset rate will increase by 4.1% from £8.36 to £8.70 per hour.

Other

  • The government has announced that England’s city regions will receive nearly £6bn to spend on ‘London-style’ train, tram, bus and cycle projects. This includes over £1bn each for Greater Manchester and the West Midlands, and £830m for West Yorkshire.


  • Over 50 road upgrades will be made to the tune of £2.6bn, with more than £5bn going towards road maintenance. According to the Chancellor, that’s one million potholes filled each year!


  • As part of the ‘levelling-up’ agenda, the Treasury has earmarked £24bn for a multi-year housing settlement. £11.5bn of this will be set aside to build up to 180,000 new affordable homes. And, a further £1.8bn will go towards bringing 1,500 hectares of brownfield land into use.


  • A talent network team will also be assembled to attract highly-skilled, science and technology workers to the UK via ‘innovation hotspots’ based in Boston, San Francisco, and Bengaluru.


  • And finally…. Alcohol. In his speech, Mr Sunak said the alcohol duty system was ‘outdated’ and wasn’t fit for purpose. He explained he was simplifying the system by ‘slashing the number of main duty rates from 15 to 6’, with stronger drinks (red wines, high percentage cider) levied with higher rates, while lower strength drinks (beer) were to come down in price. He also pledged to end the premium of 28% on sparkling wine, which will now be paid at the same rate as still wines.


  • To help struggling pubs, from February 2023, draught relief applies lower rate of duty on draught beer and cider. Cutting it by 5%. The biggest cut on beer duty for half a century.


In a Budget that included a lot of spending announcements and extensions, Mr Sunak was keen to stress his position as a low tax Chancellor. He outlined his longer-term plans to lower taxes for the remainder of this parliament. He mentioned a new charter for Budget responsibility and said he’d written to the Governor of the Bank of England to ‘reaffirm their remit to achieve low and stable inflation’.

And, in a final rallying cry to his political base, he exclaimed: “I want taxes to be going down not up. I want this to be a society that rewards energy, ingenuity and inventiveness. A society that rewards work.”

Here’s Danbro Accounting’s Managing Director, Neil Ormesher, with his reaction to the 2021 Autumn Budget:

“This was a Budget without too many huge surprises. Some may feel a sense of relief at that after the seismic announcements made during the pandemic.”

“The Chancellor’s main focus this time around centred on the government’s plans for spending, with new policies supplemented by multiple extensions to existing plans. Many of the more controversial announcements, such as tax and national insurance increases, had already been revealed earlier in the year, leaving Mr Sunak free to focus on what he sees as the ‘positives’.”

“There are no fundamental changes to the tax system to update you on, and the Chancellor remained tight-lipped on reforms to Online Sales Tax to combat the increase in online shopping at the expense of the high street. Reform is also needed on business rates, with the current system making it a somewhat unfair playing field.”

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