Spending Review Article by Specialist Financial Advisor, Ormerod Rutter
Autumn Budget 2021: Build Back Better
There aren’t many who will have missed Rishi Sunak’s Autumn Budget, where he spoke optimistically about plans to build a stronger UK economy with ambitions to level up and reduce regional inequality.
His speech had a strong focus on particular industries and stabilising public finances as we recover from the pandemic. The previously announced tax changes were confirmed, including the freezing of the annual personal allowance thresholds, and increases in employment and corporation taxes.
The Worcestershire Growth Hub’s, delivery partner, Ormerod Rutter, have summarised the new key measures that have been announced as part of the Autumn Budget 2021:
Health and Social Care Levy
The new Health and Social Care Levy will proceed as previously announced.
The 1.25% Levy will apply across the UK with an increase in Class 1 (Employee, Employer) and Class 4 (Self Employed) National Insurance contributions (NICs), and to the main and additional rates.
The Levy will not apply to Class 2 NICs or Class 3 NICs. The Levy will be introduced from April 2022, when NICs for working age employees, self-employed people and employers will increase by 1.25%.
From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and will also apply to the earnings of individuals working above State Pension age, and NICs rates will return to their 2021/22 levels.
Dividend tax rates
As previously announced, the rates of income tax to be paid on dividend income will increase by 1.25%.
The dividend ordinary rate will be 8.75%, the dividend upper rate will be 33.75% and the dividend additional rate will be 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.
The changes will apply UK-wide and will take effect from 6th April 2022.
National Living Wage
The National Living Wage (the minimum wage for those aged 23 years and above) will be increased by 6.6%, from £8.91 to £9.50 per hour. Workers aged below 23 years are eligible for the National Minimum Wage, which is also increasing for:
- 21 to 22 year olds by 9.8% from £8.36 to £9.18 per hour
- 18 to 20 year olds by 4.1% from £6.56 to £6.83 per hour
- 16 to 17 year olds by 4.1% from £4.62 to £4.81 per hour
- Apprentices by 11.9% from £4.30 to £4.81 per hour
The Universal Credit taper rate is reduced from 63% to 55%, meaning Universal Credit claimants will be able to keep an additional 8p for every £1 of net income they earn.
Capital Gains Tax
The Chancellor previously announced the capital gains tax (CGT) annual exempt amount of £12,300 would be frozen until 2026. Basic-rate taxpayers will continue to pay 10% on capital gains above this amount, while higher-rate taxpayers pay 20%.
The main rate of corporation tax is currently 19%. In the Spring Budget 2021, the Chancellor announced the rate would remain at 19% until 1 April 2023 but the rate will then increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less.
Business rates revaluations will now happen every three years, with the first new revaluation cycle planned for 2023. From 2023, every business will be able to make property improvements and for 12 months, pay no extra rates because of a new ‘business rates improvement relief’. The planned increase in the business rates multiplier in 2022/23 has been cancelled.
A new, temporary 50% business rates discount for businesses was also announced for those in the retail, hospitality and leisure sectors, including pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms. This means, from 2022, any eligible business in these sectors can claim a discount up to a maximum of £110,000.
Research & Development (R&D) tax relief
Research and development (R&D) investment will increase to a record level of £20 billion by 2024/25. Combined with R&D tax reliefs, which the government intends to modernise and refocus, total government R&D support as a proportion of GDP is forecasted to increase from 0.7% in 2018 to 1.1% in 2024/25.
Annual Investment Allowance (AIA)
The government is extending the temporary £1 million level of the Annual Investment Allowance to 31 March 2023. The change is designed to encourage businesses to bring forward investment, and make tax simpler for any business investing between £200,000 and £1 million.
Business Recovery Loan Scheme
The Business Recovery Loan Scheme is being extended to 30th June 2022, with finance up to a maximum of £2 million per business available to assist recovery from the impact of the COVID-19 pandemic and to grow. The government guarantee will be reduced from 80% to 70%.
As in previous budgets, the Chancellor decided there should be no increase in fuel duty.
Rates of Alcohol Duty were not changed in this Budget. The government is publishing a consultation on its detailed proposals for Alcohol Duty reform. These include:
- changes to duty structures
- new rates for some products sold on draught
- extension of small producer reliefs
- simplification of the administrative regime.
In addition alcohol duties have been frozen to February 2022.
Further information and resources:
A full budget summary can be downloaded from www.ormerodrutter.co.uk or head to their offices in either Droitwich or Bromsgrove to pick up a printed booklet. If you would like to access free 1-1 financial advice for your business, please contact the Worcestershire Growth Hub team using the details below.