Autumn 2021 Budget Highlights

3 mins read

On 27th October 2021, the Chancellor delivered his third budget in conjunction with the Public Spending Review. At FLB we understand that these updates can be complex and therefore we have prepared a summary of the key tax announcements made in the Budget and Spending Review.

CORPORATION TAX

Changes to R&D Tax Relief

Tax relief will be reformed from April 2023 to support modern research methods by expanding qualifying expenditure to include data and cloud costs, and to focus tax relief on innovation carried out in the UK.

Film Tax Relief (FTR) and High-End TV Tax Relief (HETR)

From 1 April 2022, production companies will be able to switch between claiming FTR or HETR during production, ensuring that relief is not lost should a company decide to change their distribution method.

Annual Investment Allowance Extension (AIA)

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

Abolition of Cross-border Group Relief (CBGR)

The government will legislate in Finance Bill 2021-22 to abolish CBGR and other related loss reliefs from 27 October 2021.

Cultural Tax Reliefs Doubled

From 27 October 2021, eligible companies engaged in the production of qualifying theatrical productions, orchestral concerts, and museum and gallery exhibitions are able to claim an additional deduction in arriving at their profits. Where that additional deduction results in a loss, the company may surrender those losses for a payable tax credit similar to R&D tax relief.

PERSONAL TAX

Some National Insurance Thresholds are Changing

The 1.25% increase in the rate of National Insurance Contributions (NICs) paid by workers and employers announced on 7 September 2021 to provide extra funds for Health and Social care takes effect from 6 April 2022.

Although the income tax personal allowance and thresholds are frozen until 2025/26, certain NIC thresholds have been increased in line with inflation.

Dividend Rates are Changing

From 6 April 2022 dividend income will be taxed at 8.75%, 33.75% and then 39.35%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. The first £2,000 of dividend income continues to be tax-free. The summary of the economic impact published on Budget Day suggests that these rates will remain in place until 2025/26.

Pension Tax Relief Unchanged

The annual pension input limit for most taxpayers remains at £40,000 which covers both individual and employer contributions. The lifetime pension allowance which dictates the size of the individual’s fund has been frozen at £1,073,100.

No Changes to Income Tax Rates and Personal Allowance Frozen

The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000. The personal allowance and higher rate threshold have been frozen since the announcement in March 2021, so will remain at £12,570 and £50,270 until 2025/26.

Individual Saving Limits Frozen Again

The adult ISA annual subscription limit for 2022/23 will remain unchanged at £20,000 and the Junior ISA limit remains at £9,000 a year.

PROPERTY TAX

Residential Property Developer Tax

A new tax will be introduced from April 2022 on the profits that companies and corporate groups derive from UK residential property development. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million.

Capital Gains Tax Property Payment Window Extended

From 27 October 2021 the deadline for UK residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days.  For non-UK residents disposing of property in the UK, this deadline will also increase from 30 days to 60 days.  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.

OTHER HIGHLIGHTS

Minimum Wage Increase

This will rise from £8.91 to £9.50 per hour from April 2022 for those aged 23 or over.

Business Rates

To support businesses and jobs in the retail, hospitality and leisure sectors, the chancellor announced a 50% discount in business rates up to £110,000.

Here at FLB, we have a highly qualified and experienced tax team based in Reading, London and Epsom. We provide the expertise, skills and experience necessary to support clients from start-ups, owner managed businesses and private clients to large corporates and international businesses.

Got a question about the tax update? Request a call-back here

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