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Autumn Budget 2021 - key pointers and headlines for MTA members

Budget 2021: key pointers and headlines for MTA members

Please find a precise below of our Budget 2021 commentary which has been published on our website https://ammu.uk/autumn-budget-overview-highlights/

If you have any queries about any of the items featured in this briefing then please do get in touch with Craig McArthur, AMAS Murrison, Chartered Accountants and Chartered Management Accountants. Email: craig@ammu.uk

Chancellor Rishi Sunak used the Autumn Budget 2021 to outline the government’s plans for post pandemic, post Brexit Britain.

Investing taxpayer money in long-term plans will, he believes, secure the economic future of the country.

Everything from the NHS, schools, local transport and the culture and leisure sector appear set to benefit from the better-than-expected economic outlook from the Office for Budget Responsibility.

But immediate changes to improve the finances of households and businesses increasingly worried about rising costs over the next 12 months were thin on the ground.

Some of the highlights were:

  • A warning for asset holders as the Chancellor expects to raise £985m from freezing inheritance tax bands, £990m from freezing the pension lifetime allowance, and an extra £65m from freezing the annual exemption on capital gains tax (CGT) in the next five years.

  • Effective immediately, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.

  • Retail, hospitality and leisure will be eligible for a temporary £1.7 billion of business rates relief next year. The business rates multiplier will be frozen for 2022/23 so bills are 3% lower than without the freeze. From 2023, no business will face higher rates bills for 12 months after making qualifying improvements to an occupied property.

  • A 6.6% increase to the national living wage to £9.50 an hour, from 1 April 2022, was confirmed. Young people and apprentices will also see increases in the national minimum wage rates.

  • The temporary £1 million level of the annual investment allowance will be extended to 31 March 2023.

Key changes previously announced for the forthcoming 2022/23 tax year include:

  • The rate of tax dividends above the dividend allowance will rise by 1.25 percentage points, as announced in September 2021

  • National insurance rates will rise by 1.25 percentage points in 2022/23 as announced in the NHS/social care package launched in September 2021.

  • A planned rise in fuel duty has been cancelled.

  • From 2023, no business will face higher rates bills for 12 months after making eligible improvements to an occupied property.

Some further background notes on the forthcoming changes and planning opportunities for MTA members.

Incentives to invest extended

The temporary £1 million level of the AIA will be extended to 31 March 2023.

Capital Allowances (CAs) represent a valuable tax deduction for your business. They can be claimed on a wide variety of capital assets including plant, machinery, equipment, fixtures & fittings and vehicles.

The Annual Investment Allowance (AIA), which offers a reduction in taxable profits of 100% of the allowable expenditure. The temporary £1 million limit for the AIA will be extended again – to 31 March 2023.

Companies investing in qualifying new plant and machinery between 1 April 2021 and 31 March 2023 will benefit from new first-year capital allowances. Investments in main-rate assets – those that qualify for 18% writing down allowance (WDA) – will be relieved by a 130% super-deduction, while investments in assets qualifying for 6% WDAs will benefit from a 50% first-year allowance.

It is important to seek expert advice before investing in new plant and machinery. The 130% super deduction, combined with the current corporation tax of 19%, means that for every £100,000 you spend, you get £24,700 back in tax reductions. In 2023 Corporation Tax will rise to 25% so with no super-deduction, a £100,000 expenditure would allow for a tax reduction equaling £25,000.

Recovery loan scheme extended

The recovery loan scheme will be extended to 30 June 2022 to help small and medium-sized businesses to continue to recover from the pandemic, but the government guarantee will be reduced from 80% to 70%.

Research and development (R&D) tax relief scheme expanded

Qualifying expenditure will be expanded to include data and cloud costs. Other changes will refocus support towards innovation in the UK rather than overseas, targeting abuse and improving compliance. The changes will take effect from April 2023.

Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the position now and what you could be entitled to claim when the changes come in; you might be surprised what expenditure can qualify and how much it could be worth to you.

Iain Robertson from ammu commented: “We welcome the inclusion of cloud computing and data costs as eligible expenditure for R&D tax credits. This had been expected and brings the criteria into line with current business practice. We will be studying the fine print and consulting with other professionals in the field to understand exactly what these changes will allow us to include in client claims.”

There’s more on qualifying expenditure and eligible costs on our website and we have a number of examples of qualifying projects featured – it’s worth taking a look at the type of projects that do qualify for a R&D Tax Credit.

Further Links:

Background information and scheme criteria

https://ammu.uk/tax/corporate-and-business-taxes/rd-tax-credits/

Examples of qualifying projects

https://ammu.uk/overcoming-uncertainty/

R&D Tax Credit Claim quote calculator and eligibility assessment

https://ammu.uk/rd-tax-credit-calculator/

Capital gains tax (CGT) – property payment window

From 27 October 2021, the deadline for UK residents to report and pay CGT after selling UK residential property will increase from 30 days to 60 days after completion. For non-UK residents disposing of property in the UK, this deadline will also increase from 30 days to 60 days. Legislation will clarify that when UK residents dispose of mixed-use property, the 60-day payment window will only apply to the residential element of the property gain.

The annual exempt amount for individuals and personal representatives will remain at £12,300 for 2022/23 and the annual exempt amount for most trusts will likewise remain at £6,150 (minimum £1,230).

Corporation tax and bank surcharge

The main rate of corporation tax will remain at 19% for the year beginning 1 April 2022 and will rise to 25% from April 2023 for businesses with profits of £250,000 and over. The rate for businesses with profits of £50,000 or less will remain at 19% and there will be a marginal taper for profits between £50,000 and £250,000 – all as announced in March 2021.

The bank surcharge rate will be set at 3% from April 2023, so banks will pay corporation tax at 28%. The annual allowance within the surcharge will be raised to £100 million.

Business rates multipliers frozen

The business rates multipliers will be frozen for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.

There will be a temporary business rates relief for eligible retail, hospitality and leisure properties for 2022/23. Eligible properties will receive 50% relief, up to a cap of £110,000 per business. From 2023, a 100% improvement relief for business rates will provide 12 months’ relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The relief will be reviewed in 2028.

From 1 April 2023 to 31 March 2035 there will be targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage. There will also be a 100% relief for eligible heat networks to support the decarbonisation of non-domestic buildings. Business rates revaluations will take place every three years instead of every five years, from 2023.Transitional relief for small and medium-sized businesses and the supporting small business scheme will be extended for one year. This restricts increases in rates bills for properties with a rateable value of up to £100,000.

Dividend tax to rise – a reminder for company directors to plan ahead

The dividend allowance will remain at £2,000. The rate of tax on dividends above the dividend allowance will rise by 1.25 percentage points from 2022/23, as announced in September 2021.

Tax year

Basic rate

Higher rate

Additional rate

2021/22

7.50%

32.50%

38.10%

2022/23 onwards

8.75%

33.75%

39.35%

Company car tax

The company car tax rates already announced for 2022/23 will remain frozen until 2024/25, as announced at Budget 2020. From 2022/23 there will be no difference in the scale rate for emissions measured on NEDC or WLTP cycles.

National insurance contributions to rise

The lower NIC thresholds and limits will rise by 3.1%, in line with CPI inflation to September 2021. The upper earnings limit, upper secondary thresholds and upper profits limit will remain aligned to the unchanged higher rate threshold at £50,270 for 2022/23, as previously announced.

NIC rates will rise by 1.25 percentage points in 2022/23, as announced in the NHS/social care package launched in September 2021. From 2023/24, NIC rates will revert to their previous levels and a new 1.25% Health and Social Care Levy will apply to employers, employees and the self-employed (including those above State pension age).

Tax year

Employer: Class 1

Employee: Class 1

Self-employed: Class 4

Main

Higher

Main

Higher

2021/22

13.80%

12.00%

2.00%

9.00%

2.00%

2022/23

15.05%

13.25%

3.25%

10.25%

3.25%

We hope you enjoyed this precise of our Budget 2021 commentary. The full commentary has been published on our website https://ammu.uk/autumn-budget-overview-highlights/

If you have any queries about any of the items featured in this briefing then please do get in touch with Craig McArthur, AMAS Murrison, Chartered Accountants and Chartered Management Accountants. Email: craig@ammu.uk