Budget Summary Oct 2021
On Wednesday 27th October 2021, Chancellor Rishi Sunak delivered his 2021 budget to the nation.
Dated: 28 October 2021 Author: Adam Longmore, Corporate Tax Director and James Hunt, Employment Services Senior Manager
Rishi Sunak’s overall message is that this budget will deliver a stronger economy for the British people.
The chancellor said it will be "an economy fit for a new age of optimism - where the only limit to our potential is the effort we are prepared to put in and the sacrifices we are prepared to make".
Taxation:
The Chancellor had previously announced measures to increase corporation tax, a super-deduction for capital allowances, the new health and social care levy and most of his spending commitments had been announced in advance. There were, however, some headline-grabbing changes:
- The Annual Investment Allowance of £1m will no longer cease at the end of the year and has been extended to 2023
- R&D tax relief will include cloud computing and data costs in future, but no longer include overseas activities
- Business Rates reforms to include a new relief for improvements together with a welcome 50% reduction for the retail, leisure and hospitality sector
- Property developers will incur a new 4% levy on profits above 25m to fund the removal of unsafe cladding
- Consultation on an online sales tax
- Tax relief for museums and galleries will be extended for two years, to March 2024
- The Universal Credit taper rate will be reduced by 8% to 55% by no later than 1 December
- The reform of Alcohol Duty, to be based on the strength of the drink in future
- National Living Wage to increase next year by 6.6%, to £9.50 an hour
|
Band |
Current Rate |
From April 2022 |
|
23 and over |
£8.91 |
£9.50 |
|
21-22 |
£8.36 |
£9.18 |
|
18-20 |
£6.56 |
£6.83 |
|
16-17 |
£4.62 |
£4.81 |
|
Apprentices |
£4.30 |
£4.81 |
Many of the impacts for business will only be felt from April 2023 when corporation tax increases and the AIA is withdrawn. The future aim of low taxes will be determined by the economic performance of the next few years.
Employers:
An uneventful Budget for employers, with the government having already announced the two biggest items, the increase in National Insurance from April 2022, transitioning to the introduction of the Health and Social Care Levy from April 2023, plus the hike in National Minimum Wage rates from April 2022.
The combined changes mean employers will see an increase in costs across their workforce, which brings a greater level of exposure for employers that are non-compliant. We are likely to see an increase in HMRC activity to help meet government spending pledges, so employers should be confident their policies and procedures meet tax compliance requirements.
Any employers not already doing so could now have greater benefit from tax-planning opportunities, such as:
- Salary sacrifice for pension arrangement – reducing National Insurance (and Social Care Levy) liabilities for employers and employees
- Company cars – swapping to fully electric cars, if practical to do so, as the benefit charge is minimal, 2%
- Electric car salary sacrifice – providing employees with the opportunity to obtain a company car via salary sacrifice. This could bring significant tax and National Insurance savings for staff who want an electric car, as well as for the employer
- Efficient benefits – considering the use of benefits that derive savings either from tax or employer purchasing power, as an alternative to pay increases
For employees, the increase in National Insurance together with a freeze on personal allowances and the higher rate threshold will mean take-home pay will reduce from April if pay is to remain static, further increasing pressure on employers if staff push for wage increases or seek to move in a competitive labour market.
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