Autumn Budget 2021
No news is good news … or is it?
Today’s Budget saw the shortest list of major tax policy announcements in many years. The emphasis was all on how much cash Rishi could splash. But behind the largesse (and the eye-catching alcohol duties re-jig – fruit-based cider, anyone?), tax rises previously announced are taking effect.
Personal tax rates
No changes to the rates of Income tax for individuals have been announced today, but, as announced in September, April 2022 will see:
an increase of 1.25% in all rates of national insurance contributions, i.e. 13.25%
for employee NICs up to the upper earnings limit (and 3.25% above that level) and 15.05% for employer NICs; and
a similar increase of 1.25% in the rates of income tax on dividends (with a top rate of 39.35% for those with income in excess of £150,000).
As inflation rises, so the ‘fiscal drag’ effect of the freezing of the personal allowance and tax rate thresholds announced in March will increase. The overall result is an ongoing increase in tax liabilities for most individual taxpayers.
There was much concern, as with previous Budgets, that the rate of CGT would be increased or that the scope of Business Asset Disposal Relief might be reduced (it affords a tax rate of 10% on a lifetime allowance of relevant gains of £1 million) or removed altogether. No such changes were announced and there was no indication that this is under active consideration. Can we dare to hope that this limited tax relief will be left in peace for the foreseeable future?
Corporation tax
As with personal taxes, the Chancellor is sticking to the corporation tax rate rise announced in March –the main rate of corporation tax will rise to 25% in April 2023. Along with the super-deduction announced in March for certain expenditure (applicable only for two years), the annual investment allowance of £1m has also been extended until 31 March 2023. This entitles companies chargeable to UK corporation tax to 100% relief in respect of expenditure on qualifying plant and machinery up to the annual limit.
The expiry of these tax reliefs combined with the increase in the rate of corporation tax creates a cliff-edge for profitable companies on 31 March 2023; after this date, valuable tax reliefs will fall away and tax on profits will jump by almost a third. Businesses should plan for this dramatic change now.
Other changes for UK businesses
Other measures were announced relevant for UK businesses of varying types:
R&D tax reliefs, which are potentially extremely valuable, especially to small companies, are to be restricted to UK activity but extended to cover data and cloud computing costs.
The tonnage tax regime is to be adjusted to encourage shipping companies to migrate to the UK.
Cross-border group relief and other associated loss reliefs (under which tax losses made in EU jurisdictions could be used against UK profits) are abolished immediately.
The Government is to consult on a new online sales tax, to be used to support the high street. A rate of 2% on sales has been suggested.
The anticipated Residential Property Developer tax is coming in April 2022: 4% on profits over £25m.
A new tax regime for asset holding companies used by funds and institutional investors has been announced. Benefits include exempting gains on disposals of many assets and enhanced interest deductions.
Property taxes
No substantive changes to stamp duty land tax rates or SDLT rules have been announced. Following the end of the SDLT holiday, this is an important revenue source for the Government so no rate reductions should be expected for some time.
Business rates are to be reformed (to a limited extent):
There is a significant discount for businesses in the retail, hospitality and leisure sectors (up to £110,000).
Reliefs will be available for improvements (no increase in rates for 12 months afterwards) and for installing green technologies;
But valuations will now be required every 3 years. This may lead to increased business rates for some.
To end on a practical note: the time limit for making CGT returns and payments on sales of land has been extended from 30 days to 60 days. This should allow taxpayers more time to take professional tax advice.
“My goal is to reduce taxes. By the end of this Parliament, I want taxes to be going down not up.”
Chancellor’s Speech
“I want to be clear with all Members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation.”
Chancellor’s Speech – Spring Budget 2021
“Now is not the time to remove tax breaks on investment.”
Chancellor’s Speech
"we will make the business rates system fairer and timelier with more frequent evaluations every three years."
Chancellor’s speech
About the author
Charles Goddard is a tax solicitor with over 20 years' experience of advising on the corporate tax aspects of a wide range of corporate and financial transactions. His clients range from multinational blue-chip institutions to private individuals.
Find out more about Charles and our corporate tax advice and consultancy services for business.
About the author
Lee is an experienced solicitor who has specialised in corporate tax for over 20 years. Lee’s principal focus is advising on the tax issues that arise on corporate transactions together with the tax-related documentation for such transactions and also on real estate transactions.
Find out more about Lee and our corporate tax advice and consultancy services for businesses.
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