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Autumn Budget Summary 27 October 2021

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press before the official report to parliament, 27 October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:
Taxation changes and Other announcements


Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

1. Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the total value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any gains in earnings will be taxed, and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced on 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

– Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
– Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
– Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)


Starting rate for savings

The band of savings income subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year is to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year-end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24, and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and gains.

National Insurance

Boris Johnson announced – earlier this year – a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds and the rates of Class 2 and 3 National Insurance contributions for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit, which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026, the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart-avoidance changes, there are two changes worth mentioning:

Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
The deadline for reporting chargeable residential property sales – not the primary residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that are complete on or after 27 October 2021.
The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%. As announced earlier this year, from 1 April 2023, there will be two rates of CT.

– Taxable profits up to £50,000 will continue to be taxed at 19%

– Taxable profits more than £250,000 will be taxed at 25%

– Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3%, and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improving compliance. These changes will be legislated in Finance Bill 2022-23 and will take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50%, respectively, from 27 October 2021.
From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023 and returning to 25% from 1 April 2024.
Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first-year allowance introduced in April 2021 will continue to apply to qualifying expenditure up to 31 March 2023.
The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have a retrospective effect from 1 January 2019.

Van and car benefit changes


This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rAs a result, the 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.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.
This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.
The temporarily reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT-free zone model for Freeports. They are:
– implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
– make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
– amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.


2. Other announcements

Business rates changes


The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief cap is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. However, the government is to consult on implementation, which will take effect from 2023 and will be reviewed in 2028. So if you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes


– The agreed-upon rates above the Retail Prices Index (RPI) will increase Tobacco Duty from 6 pm on 27 October 2021.
– Alcohol duty rates will be frozen.
– Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
– Aggregates Levy – the government will freeze the Levy rates in 2022-23.
– Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
– VED rates for cars, vans and motorcycles will increase in line with RPI changes. The change will be effective from April 2022.
– VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
– Fuel Duty rates for 2022-23 will remain frozen.
– Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. – Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.


ISA investment limits for 2022-23

The limits set for 2022-23 are:
– For Adult ISAs the limit remains at £20,000
– Junior ISA limit remains at £9,000
– Child Trust Funds remain unchanged at £9,000


National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:
– The 21 to 22-year-old rate will be £9.18 per hour
– The 18 to 20-year-old rate will be £6.83 per hour
– The 16 to 17-year-old rate will be £4.81 per hour
– The apprentice rate will be £4.81 per hour

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Government announces winter COVID plan

Prime Minister, Boris Johnson has set out the government’s autumn and winter plan for managing Covid.

The government is aiming to sustain the progress made and prepare the country for future challenges while ensuring the National Health Service (NHS) does not come under unsustainable pressure.

The government plans to achieve this by:

  • Building our defences through pharmaceutical interventions: vaccines, antivirals and disease-modifying therapeutics.
  • Identifying and isolating positive cases to limit transmission: Test, Trace and Isolate.
  • Supporting the NHS and social care: managing pressures and recovering services.
  • Advising people on how to protect themselves and others: clear guidance and communications.
  • Pursuing an international approach: helping to vaccinate the world and managing risks at the border.
    This is known as Plan A. There are of course a number of variables that could change the expected outlook including the outbreak of new variants and other seasonal respiratory diseases such as the flu.

    If the data suggests the NHS is likely to come under unsustainable pressure, the government has prepared a Plan B for England. It is hoped that this plan will not be required but the plan contains certain measures which can help control transmission of the virus while seeking to minimise economic and social impacts.

    This includes:
  • Communicating clearly and urgently to the public that the level of risk has increased and with it the need to behave more cautiously.
  • Introducing mandatory vaccine-only COVID-status certification in certain settings.
  • Legally mandating face coverings in certain settings.
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Budget date announced

The Chancellor of the Exchequer, Rishi Sunak, has confirmed that the next UK Budget will take place on Wednesday, 27 October 2021. This will be the Chancellor’s third Budget and the first one to revert back to the Autumn Budget schedule interrupted by Brexit-related issues and then by the coronavirus pandemic. It means that this year, 2021, will see 2 Budget’s the first that took place in March and the second that has been scheduled for October.
Details of all the Budget announcements will be made in a special section of the GOV.UK website, which will update following the completion of the Chancellor’s speech in October.
The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.
The Chancellor also confirmed that 27 October 2021 will see the government spending plans set out under the Spending Review 2021. The three-year review will set UK government departments’ resource and capital budgets for 2022-23 to 2024-25 and the devolved administrations’ block grants for the same period.

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Construction services and reverse charge

New VAT rules for building contractors and sub-contractors came into effect on 1 March 2021. The new rules make the supply of most construction services between construction or building businesses subject to the domestic reverse charge. However, the reverse charge only applies to supplies of specified construction services to other businesses in the construction sector.

HMRC’s guidance states that you must use the reverse charge for the following services:

– constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
– constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
– installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
– internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
– painting or decorating the inside or the external surfaces of any building or structure
– services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, – site restoration, landscaping and the provision of roadways and other access works
This means that for these specified supplies, sub-contractors no longer add VAT to their supplies to most building customers; instead, the contractors are obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge. On the same VAT return, contractors can claim back the deemed input tax on the supply subject to the usual rules.

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The Help to Grow Management scheme

The Help to Grow: Management course is a government-backed programme to help business leaders develop their strategic skills, create jobs and boost their business performance.

The 12-week programme is delivered by over 40 leading business schools across the UK and combines a practical curriculum with 1 to1 business mentor support throughout and includes modules on financial management, strategies for growth and innovation, and approaches to digital adoption.

The government has committed to making 30,000 places available on the course over the next 3 years. The cost of the course is 90% subsidised by the government and costs only £750.

UK businesses from any sector that have been operating for more than one year, with between 5 to 249 employees are eligible to enrol. The participant in the course should be the decision-maker or member of the senior management team within the business. Charities are not eligible as the scheme is designed to support commercial enterprises.

The Business Secretary said:

‘Help to Grow: Management is a fantastic scheme to equip ambitious business leaders with the tools to take their business to the next level, helping create an even more high-productivity, the high-wage economy we build back better from the pandemic.’

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Relief for self-employed trading losses

There are a number of tax reliefs available for self-employed taxpayers that make a loss carrying on their trade, profession or vocation (collectively referred to as a ‘trade’) and for their share of trading loss for any partnerships they are involved with.

For the 2020-21 tax year, trade losses can be relieved in a number of ways. This includes the following:

* By using the loss to reduce income for the year ended 5 April 2020 and / or 5 April 2019. If there are still trade losses remaining (after your income has been reduced to nil) then you may be able to set-off some or all of the remaining loss against chargeable gains.
* A claim can also be made for losses made in the first 4 years of trade known as early trade losses relief. Taxpayers need to look at the earliest year first (i.e. 2016-17) and use any remaining loss in 2017-18 and then in 2018-19. The time limit for making claims for 2019 to 2020 losses is 31 January 2022.
* Taxpayers can carry forward any loss against future profits of the same trade or income from the company (where you transfer your trade to a company in exchange for shares in that company), or post cessation receipts
* Terminal loss relief is available for businesses that suffer a loss in the last 12 months of trade of a business. Terminal loss relief allows for the carry back of any trading losses that occur in the final 12 months of trading to be set off against profits made during the final tax year or any or all of the previous three tax years.
* Self-employed taxpayers who were previously employed can offset trading losses against employment earnings or other earned income in the current or preceding tax year.


There is also an overall cap on certain Income Tax reliefs. The cap is set at 25% of income or £50,000, whichever is the greater.

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Carry Corporation Tax losses back

Corporation Tax relief may be available where your company or organisation makes a trading loss. The loss may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same accounting period.

Where the amount of a trading loss exceeds the profits of the same accounting period, the company may claim to carry back the excess against the profits of preceding accounting periods. The preceding accounting periods are those falling wholly or partly within the preceding period.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.

If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, most recent first.

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English plastic bag charge to double

The single-use carrier bag charge came into effect in England on 5 October 2015. This introduced a minimum charge of 5p on single-use carrier bags supplied by large shops (with over 250 employees) in England.

Since then single-use carrier bags are no longer given away free when buying goods from large shops. Shoppers who bring their own bags or use thicker, reusable ‘bags for life’ do not need to pay the charge.

The new law has been very effective, reducing the use of single-use carrier bags by over 95% in the main supermarkets and raising over £180m for good causes.

A consultation on extending the remit of the scheme and increasing the minimum charge was launched in December 2018. The government response to the consultation was published recently following delays caused by purdah restrictions and re-prioritisation in light of the COVID-19 pandemic. The government has now confirmed that the charge is to be increased to 10p and extended to include all retailers from April 2021. It is thought that this new charge will apply to almost all plastic bags given out by businesses across England.

The government is also introducing restrictions on the supply of plastic straws, stirrers and plastic-stemmed cotton buds. These additional restrictions will be introduced in October 2020.

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Kickstart program opens in Wales

Under the new £2 billion Kickstart scheme, employers will be able to offer young people on Universal Credit and at risk of long-term unemployment, state-subsidised work placements for six months. The Kickstart scheme is available to qualifying 16 – 24 year olds in England, Scotland and Wales.

Commenting on the launch of the scheme in Wales, the Secretary of State for Wales, Simon Hart, said:

We have taken unprecedented action to secure Wales’s economic recovery from the pandemic. More than 500,000 Welsh jobs have been protected through the Job Retention and Self Employed schemes while over 40,000 businesses in Wales have received more than £1.4 billion in loans.

Protecting, supporting and creating jobs is at the heart of our plan for recovery. Aimed at young people, the Kickstart scheme will make sure no-one is left behind as we get the Welsh economy moving again.’

The government will fully fund each “Kickstart” job by paying 100% of the age-relevant National Minimum Wage plus associated employer National Insurance contributions and employer minimum auto-enrolment pension contributions for 25 hours a week.

Businesses of all sizes looking to create quality jobs for young people can apply and there is no cap on the number of places. There will be a simplified application process for employers offering fewer than 30 placements.

The government will also help by paying employers £1,500 to set up support and training for people on a Kickstart placement. The scheme will initially be open until December 2021 but may be extended.

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Which video conferencing software?

The process of choosing a video conference solution for your practice can be a little hit and miss due to the variety of solutions on offer. Practitioners have adopted the use of web conferencing to:

Deal with staff matters
Organise client meetings
Organise partners’ meetings
In fact, much of the activity previously undertaken face to face is now accommodated by an old-fashioned telephone call – sometimes with a video link – or video conferencing software.

The problem is, there is a bewildering array of software to choose from.

Practitioners still looking for a solution could take a look at a recent report issued by Software Reviews that ranks alternatives based on specific criteria. Google “SoftwareReviews web conferencing”.

Or you could ask clients or IT contacts what they recommend.

Truthfully, the differences that seem to separate the leading brands are not that great and as long as the software you choose does the job, why change.

What is clear is that video conferencing is here to stay. It is doubtful that the present restrictions on face to face contact will be eased significantly any time soon.

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