On Wednesday, the 27th of October, 2021, Chancellor Rishi Sunak announced a raft of tax changes that are sure to affect us all. The budget speaks largely to spending on public services. It covers healthcare, police budgets, housing, rail and transport, child services, education, business support, COVID support, taxes, benefits, and more.
First, let’s look at where the budget is being spent:
- Healthcare spending will increase by £44 billion to over £177 billion.
- Courts, prisons and probation services are getting a £2.2 billion investment, plus £3.8 billion for the “largest prison-building programme in a generation”.
- 180,000 affordable homes will be built with £11.5 billion
- Those sleeping rough or homeless will be supported with £640 million towards services
- £12.6 billion will go into road upgrades and maintenance as well as improvements for buses, cycling and walking paths
- Rail upgrade will receive £51.7 billion
- £2 billion in new funding to support schools
- Child services will receive investments across a number of projects to the amount of roughly £1.6 billion.
What follows are the changes set to affect our members.
Business rates
Business rates will remain the same for most, but there are discounts for some. Retail, hospitality and leisure sectors will get a new 50% business rates discount, up to a maximum of £110,000. This translates to a tax cut of nearly £1.7 billion. What’s more, from 2023, all businesses will be eligible to make property improvements with no extra business rates for 12 months.
There will also be investment relief for businesses adopting green energy technology.
Tax changes
Instead of ending in December, as previously planned, the £1 million annual investment allowance has been extended to March 2023. There will also be changes to the universal credit taper. Currently set at 63%, it will be cut to 55% to save losses for more hours worked. Work allowances will also be increased by £500.
Continuing as planned, payroll tax — national insurance — is rising by 1.25% in 2022, and tax on dividends will increase by the same 1.25%. Over the next three years, this is predicted to produce £36 billion.
There was also a welcome extension, taking effect immediately, from 30 days to 60 days of the deadline to submit a capital gains tax (CGT) return, and pay any CGT due, on the disposal of UK residential property. Therefore, if the completion date was on or after 27th October 2021 the 60 days will apply whereas if Completion happened before this date, taxpayers will still only have 30 days.
A policy paper published as part of the Chancellor’s announcements confirms the government’s plans to reform the ‘basis period’ rules which determine how trading income for unincorporated businesses is allocated to tax years. The proposal is to change the allocation so that it will be based on the profits or losses arising in the actual tax year, whereas now it is in accordance with the accounting period ending in the tax year. The measure will only affect businesses which draw up annual accounts to a date other than 31 March or 5 April. The change will result in a significant acceleration of tax payments by businesses affected by the change.
The new ‘tax year basis’ will apply from the tax year 2024-25, in anticipation of the start of Making Tax Digital for income tax self-assessment in April 2024, with a transition to the new regime in the tax year 2023-24.
Continually following announcements to make sense of changes and keep our community abreast of how it affects them, the team at The MGroup will be here to translate this news, giving you practical insights and advice on what needs to be done in order to manage your business taxes and or your personal taxes effectively.