Behind the headlines: What you should know from the Autumn Budget 2021
With the clock barely passing the hour mark, it was a relatively short Budget statement, but Rishi Sunak’s Budget 2021 had the announcements of funding and spending coming thick and fast. Packed into that statement was an increase in departmental spending over this Parliament of £150bn, under the theme of “A Stronger Economy for the British People”
We’ve dug through the 200-page published document to bring you the facts behind the key announcements as laid out in the Spending Review and Autumn Budget, plus a round-up of some other relevant points that didn’t get the headline treatment.
Top line: The largest increase in department spending this century
The Chancellor announced a headline figure of £150bn increase in total departmental spending over this Parliament in his speech.
In real terms, that’s £90bn, which is acknowledged in the 3.8% growth figure, up until this Parliament ends in three years time.
Note also, that “this century” is only 20 years old.
Top line: The largest health capital budget since 2010
There’s a lot of information about how that budget will be spent, but no time frame allocated to build 40 new hospitals and recruit 50,000 new nurses. The Health and Social Care Levy and increase in dividend tax is expected to raise around £13bn a year to fund the budget increase. That dividend tax increase is 1.25% from April 2022 [P132, Table 5.1]
Top line: Support for culture and heritage
Hopefully some welcome news for our charity customers who have been hit hard by lockdown and enforced closures, with a commitment to funding recovery in cultural industries.
Underlying the extension of the Museums, Galleries and Exhibition Tax Relief is a two-year tapered rate increase from April 2022 for Theatre, Orchestra & MGTER Tax Relief.
Per 5.41 on page 143:
5.41 Museums and Galleries Exhibition Tax Relief (MGETR) – MGETR will be extended for a further two years until 31 March 2024, continuing the government’s support for charitable companies to put on high-quality museum and gallery exhibitions.
5.42 Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and MGETR –The government will increase the headline rates of relief for TTR, OTR and MGETR:
• from 27 October 2021, the headline rates of relief for the TTR and the MGETR will temporarily increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50%
• from 1 April 2023, the rates will be reduced to 30% and 35% and will return to 20% and 25% on 1 April 2024. For MGETR, the relief will expire on 1 April 2024 and no expenditure from this date will be eligible for relief
• from 27 October 2021, OTR rates will temporarily increase from 25% to 50%, reducing to 35% from 1 April 2023 and returning to 25% on 1 April 2024
• from 1 April 2022, changes will be made to better target MGETR, TTR and OTR and ensure that they continue to be safeguarded from abuse
Top line: Cuts to business rates of £7bn
The published budget paper states that this is the biggest cut to business rates in 30 years, not including the COVID-19 response. The current system of rates was introduced in 1990.
And Online Sales Tax might be on the cards, with a view to supporting bricks-and-mortar retailers with the proceeds. More on that “shortly”, per 2.71:
2.71 The government will also continue to explore the arguments for and against a UK-wide Online Sales Tax, the revenue from which would be used to reduce business rates for retailers with properties in England and with the block grants of the Devolved Administrations increased in the usual way. The government will publish a consultation shortly.
Top line: Draught relief will provide a long-term investment in British pubs
A search of the documentation for the phrase “Draught Relief” provides no results, but there are plenty of references to alcohol duty reform and a “new relief”.
But, there’s also a statement here in 5.58 that says (emphasis added):
Alongside this, a new relief that recognises the importance of pubs and supports responsible drinking will be introduced, with duty rates on draft beer and cider being cut by 5%. The government is publishing a consultation on the detail of these reforms, which will close on 30 January 2022.
With many of our customers either working in pubs or supporting pubs as their tax agents, it’ll be worth taking a look at that consultation here. (Opens in a new window)
What didn’t make the headlines?
At 200 pages long, it’s no surprise that plenty of information didn’t make it into the Chancellor’s speech to Parliament. Here are a few highlights that our customers may be interested in:
Bank Corporation Surcharge
The statement did confirm that the Bank Surcharge will be set at 3% to ensure that “banks will continue to pay a higher rate of overall corporation tax than other companies (28% versus 25%) and a higher rate than they did previously (27%).”
Beneath that in the full documentation is notice that:
The government will also raise the annual allowance within the surcharge to £100 million to ensure that the tax system is supportive of growth within the UK banking market, promoting competition to the benefit of consumers. [2.80]
Accountancy changes for insurance contracts
Another consultation ahead for the regulation for insurance companies:
The government is introducing powers in Finance Bill 2021-22 to lay regulations for insurance companies to spread the transitional impact of IFRS (International Financial Reporting Standard) 17 for tax purposes and to revoke the requirement for life insurers to spread acquisition expenses over seven years for tax purposes. The government will consult on the design of these rules. [5.68]
Tax administration and non-compliance
Basis period reform gets a mention on page 147:
The government will legislate in Finance Bill 2021-22 to reform income tax basis periods so businesses’ profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date. This removes the complex basis period rules, the need to charge tax on profits twice and the need for overlap relief. The transition to the new rules will take place in 2023-24 and the new rules will come into force from 6 April 2024. [5.70]
Plus there’s confirmation of the delay to MTD for ITSA to April 2024, along with confirmation that the new penalty regime will come into effect for VAT from April 2022 and for ITSA from April 2024.
Capital Gains Tax
The window to report and pay CGT on UK residential property will increase to 60 days from the completion date. Per the documentation:
This will ensure that taxpayers have sufficient time to report and pay CGT, as recommended by the Office of Tax Simplification. When mixed-use property is disposed of by UK residents, legislation will also clarify that the 60 day payment window will only apply to the residential element of the property gain. [5.47]
There’s no change to savings account rules, with the band of savings income for 0% starting tax rate remaining at £5,000, the adult ISA annual limit at £20,000 and the Junior ISA and Child Trust Fund at £9,000 [5.35, 5.36, 5.37]
We’re in the business of partnership, both with our customers and with the accounting community at large. To learn more about us and how our software helps practices ease the burden of compliance work, get in touch here.
This article is not to be taken as advice. For clarity on any points, click through to the documentation here.