Key Autumn 2021 budget announcements that may affect our clients.

The Autumn 2021 budget was mostly leaked beforehand so there were very few surprises.  UK taxation is now at its highest for 70 years but if the predicted economic growth is achieved, the chancellor hopes to reduce tax before the next election! We have only concentrated on the announcements for England.

Personal Tax

  • National Insurance rates paid by the employed, self-employed and employers will increase temporarily by 1.25% from April 2022 for 12 months.  Then the new Health & Social Care Levy will be brought in from April 2023.
  • Class 1 NI threshold rising to £9,100 from £8,840 for Employer’s NI & to £9,880 from £9,568 for Employee’s NI. Class 4 NI threshold is rising to £9,880 from £9,568.
  • The Lower Earnings Limit increases to £6,396 from £6,240, which is the minimum annual employment income you need to earn to get entitlement to benefit.
  • The Personal tax-free Allowance remains at £12,570 and the Basic Rate Tax Band at £50,270 until 2026.
  • There are no changes to income tax rates except for dividend tax which increases by 1.5% to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers & trusts.
  • The annual pension allowance of £40,000 is only restricted where an individual’s income exceeds £200,000 with a minimum allowance of £4,000 for those with incomes over £312,000.  The pension lifetime allowance is frozen at £1,073,100 until April 2026.

Capital Gains Tax

  • Capital Gains Tax annual exempt amount remains at £12,300 until April 2026.
  • The deadline for filing Capital Gains Tax returns and paying any associated tax on UK residential property sales is extended to 60 days after completion (30 days currently).
  • Surprisingly again, there were no other changes announced!

Benefits in Kind.

  • Electric only cars have 2% benefit in kind for 2022/23. Electric only vans have 0% benefit in kind for 2022/23.
  • Employees forced to work from home can continue to be reimbursed tax-free by £6 per week. Higher rates can be claimed if the actual cost of providing the home office is calculated.
  • No benefit arises on home office equipment purchases for employees working from home until 6 April 2022.  If the employer retains ownership, then no benefit in kind will apply.

Business

  • Corporation tax will increase to 25% from April 2023 for businesses with profits over £250k. Corporation tax will remain at 19% for business with profits of £50,000 or less.  A taper system will operate for businesses with profits between £50,000 – £250,000.
  • If your business has made a loss during an accounting period ending between 1 April 2020 and 31 March 2022, we can set this loss against the tax paid during the previous 3 tax years (rather than just 1 tax year).
  • The Recovery Loan Scheme offering loans between £25,000 and £2 million, plus invoice or asset finance between £1,000 and £2 million, has been extended to 30 June 2022 for all businesses to help with recovery. The government will guarantee 70% of the finance, with the finance term running up to 6 years.  Businesses can apply even if they have had support from an existing bounce back loan.
  • There will be an extension of Research & Development tax relief from April 2023 to include data and cloud computing costs as qualifying expenditure.  But only R&D activity that takes place in UK will be qualifying.
  • There is a new Super Deduction scheme to encourage businesses to invest in plant and machinery assets, which will run for two years from April 2021. 130% of the cost of new plant can be deducted from the company’s taxable profits.  A first year allowance of 50% is in place for qualifying “special rate” assets too.
  • The apprenticeship hiring incentive of £3,000 has been extended to include any new apprentices that join your organisation until 31 January 2022.  By May 2022 a new enhanced apprenticeship recruitment service will be in place for SMEs.
  • The Kickstart Scheme helping young people on Universal Credit to find work, has been extended until March 2022.
  • Annual Investment Allowance will remain at its current level of £1m until 31 March 2023.
  • Employment allowance, which can be set against a small employer’s secondary class 1 liability, remains at £4,000 for 2022/23.

 

Making Tax Digital

  • VAT registered businesses with a taxable turnover below £85,000 will need to keep digital records and submit their returns under Making Tax Digital rules from April 2022.
  • Self-employed businesses and landlords with annual business/property income over £10,000 will need to keep digital records & provide regular updates to HMRC from April 2024 (a delay of 1 year).
  • Basis periods are being reformed so any sole trader businesses with non 5 April/31 March year ends (which are being treated as one and the same date for these purposes!) will need to move their year-end falling within 2023/24 tax year to 5 April/31 March 2024.  Any additional profits will be spread over 5 years but can elect to accelerate this tax payment if beneficial.
  • We are currently awaiting the government’s formal response to the consultation on Making Tax Digital for corporation tax.

VAT & Duty

  • The VAT registration threshold will continue at £85,000, and the deregistration threshold at £83k, until at least March 2024.
  • Existing VAT rate of 12.5% for hospitality, accommodation & leisure attractions maintained until 31 March 2022.
  • There will be a new penalty system for late VAT returns from April 2022. The penalty will be a fixed rate of £200 once a threshold of points has been exceeded, with one point received for each submission deadline that is missed.  No late payment penalty if pay within 15 days of the due date.  This will lead to lower VAT penalties for most 😊

Business rates

  • Eligible retail, hospitality & leisure properties will continue to receive at least 50% business rates relief for 2022-2023 financial year.
  • The business rates multiplier is frozen for 2022-2023 financial year (normally 3%).
  • A new relief from 2023 on rates for 12 months after major property improvements.

Other

  • Inheritance tax thresholds will be frozen until April 2026.
  • No increases to fuel or alcohol duty until April 2023.  Simplification reforms for alcohol duty in proportion to alcohol content are planned from 2023 (consultation currently ongoing).  5% reduction in duty on craft beers & ciders consumed in pubs.
  • A surprising reduction in Air Passenger Duty for domestic UK flights (given the environmental impact) but the addition of an ultra long-haul banding from 1 April 2023.
  • National Living Wage (applying to workers aged 23 or over) increases to £9.50 per hour from April 2022 onwards (currently £8.91).
  • Normal Minimum Pension Age increases to 57 from 5 April 2028, which is the earliest that a pension can be withdrawn unless a protected pension age is in place.

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