UK Autumn Budget 2021 – An Insight

An Overview

The second UK budget of 2021 with the key themes of investment and innovation was announced
by the chancellor on 27^th of October. The main focus of the budget was to reboot the economy after the COVID-19. Except a few changes to selected areas of the tax system, no fundamental reforms were announced, making it a quiet budget for most. The Government also announced that later in autumn it would bring forward tax administration and maintenance like ‘Tax Day’.

Key measures of the autumn Budget 2021

1. Banking Surcharge will be reduced from 8 percentto 3 percent from 1^st April, 2023.There will be an increase in the surcharge allowance from the previously existing £ 25 million to £ 100 million to banking entities. This reduction in the banking surcharge rate indicates that from April 1^st 2023, the banks will be taxed on their profits at 28 percent. Thus, there is an increase of 1 percent in the current tax rate i.e., 8 percent surcharge plus 19 percent headline rate.
2. The current system of Business Rates Review is to be retained but there will be some major reforms from April 2023.A 50 percent discount is going to be implemented for small leisure, retail and hospitality business immediately. This discount (up to a maximum of£ 110,000) is for FY 2022-2023. This will help to relieve the small business owners who are still reeling from the COVID impact and online business competition.
3. New relief plans will be applied on green technologies such as solar panels from 2023-2035, no matter if they are installed for business or for private uses.
4. In order to encourage and incentivize investment in property and property improvements (for example- upgradation of office air-conditioning), the UK Government will be introducing a 100 percent improvement relief. This relief is expected to commence on 2023 and it will be reviewed again in 2028.
5. It was promised that the online sales tax matter will also be further looked into.
6. There will be further extension of the temporary £1 million Annual Allowance till 31 March 2023.
7. R&D tax reliefs will be reviewed and reformed to improve their effectiveness and scope. It has been confirmed that R&D incentives will be focused on modern innovations and will include cloud computing and data. There will be further amendment of incentive rules so that UK R&D is encouraged whereas overseas R&D can be potentially excluded.
8. From 1^st April, 2022, an increased National Living Wageof £9.50 per hour for age groups of 23 and above will be effective.
9. Pension tax relief for low earners in net pay arrangements.
10. Residential Property Developer Tax was introduced wherein a4 percent tax will be levied on the profits of a builder company. There will also be a developer allowance of £ 25 million per year which will be applied on a group basis.
11. Income tax basis periods will be modified so that regardless of the accounting date the profit or loss of businesses will arise in the tax year itself.  The new rules will be effective from 6^th April, 2024.
12. There will be expansion of the scope of R&D tax reliefs with the inclusion of cloud computing and data costs.
13. Although the speech didn’t include anything on dividend rates, the Treasury papers confirmed that there will be an increase in the rates of income tax applicable to dividend income by 1.25%.

For a more comprehensive discussion and understanding of how these reforms and measures of the 2021 Budget will impact your business, contact us. We at CoreAdviz support entrepreneurs, start-ups and small to medium businesses to solve tax related concerns with dedicated expert advice along with real time book-keeping and accounting services.