Biggest rates cut in three decades

 

On Wednesday 27 October 2021, Chancellor Rishi Sunak announced his Autumn Budget.

Mr. Sunak resisted the temptation to raise taxes to start paying for the emergency support schemes that kept so many businesses afloat during the pandemic in 2020/21.

Instead, Sunak continues to bask in the warm glow reserved for generous chancellors following his latest Autumn Budget speech, thanks largely to cutting the Universal Credit taper rate by 8%, bringing it down from 63% to 55%, from 1 December 2021 at the latest.

Sunak also boosted struggling businesses with premises by revealing a five-point plan to retain and revamp business rates in England, starting with cancelling the multiplier for 2022/23 and confirming revaluations will take place every three years from April 2023, instead of every five years.

Beyond that, the Treasury took the unusual step of announcing several key measures well in advance of the day itself.

We already knew that several key tax rates and thresholds were frozen last spring, up to and including 2025/26, while news of the national living wage increasing by 6.6% was already common knowledge long before today.

And, last month, we heard the triple-lock – a pledge to increase the state pension’s value by at least 2.5% each year – would be suspended for a year as inflation continues to soar.

The Office for Budget Responsibility reckons inflation, as measured by the Consumer Prices Index, will average at 4% over the next year.

Then, in the guise of the health-and-social-care levy, a 1.25% National Insurance contributions (NICs) increase from April 2022 served to frustrate some company directors of owner-managed businesses, along with a corresponding 1.25% increase in tax on dividend income.

Directors felt they’d already borne the brunt of limited government support during the midst of COVID-19; now, they’re being asked to cover the cost, through tax and NICs for themselves and their employees.

In his speech on 27 October 2021, the Chancellor also announced a residential property developers’ tax will be levied on corporate developers with annual profits of £25 million or more at 4%.

Plenty of crowd-pleasers were also announced. Alcohol duties, for example, will be “radically simplified”, while pub landlords will be toasting the new ‘draught relief’ which lowers duties applying to draught beers and ciders by 5%.

There was no real mention of climate change, aside from the surprising decision to introduce a cheaper, domestic band for air passenger duty – which will be sure to raise some eyebrows at next month’s COP26 conference in Glasgow.

As ever, of course, there were a handful of policy changes not announced in the speech but instead squirreled away in background papers.

Our team of tax experts has been over those with red pens in hand and highlighted several items of note, such as changes to the reporting requirements, which will affect capital gains tax.

Overall, the Chancellor remains in spend mode, with a little hint of what might be in store as the UK economy continues to recover and the national debt demands to be paid.

To download the full Budget overview, click here.