What will be in the Autumn 2021 Budget?

Rishi Sunak sets out his Budget and Spending Review on 27 October 2021 against a backdrop of unprecedented economic disruption caused by the pandemic and record-breaking public debt, as well as growing concerns over rising inflation and interest rates.

The previous two Autumn Budgets were both delayed until the Spring, so this is the second Budget this year after the March 2021 Budget. 

At least with it being held in October rather than March, businesses will have several months, rather than weeks, to prepare for any tax changes.  However, bear in mind that some tax changes may be effective from Budget Day.

Mini Budget

Let us not forget that we have already had a mini-Budget this September with the announced 1.25% tax hike in National Insurance and dividends tax from next April, and the proposed suspension of the pension triple lock. Both measures are a breach of the government's election manifesto, so what else can we expect the Chancellor to unveil?

Tax rises on the way

There are big tax increases coming next April, alongside frozen tax allowances, but are we likely to see a booster tax rise in the autumn?

There was much talk in 2020 of the Chancellor increasing Capital Gains Tax. Will he revisit this in the Budget? Will he consider a one-off wealth tax to help pay for the pandemic, or something more long term? Is this something that could be effective from Budget Day to prevent any forward planning?

Now would be the time for the government to get any unpopular policies onto the statute book well before the next election.  So now could also be a good time to review your tax affairs if you feel you could be adversely affected by likely announcements.

Will the Chancellor also look to encourage greater investment and productivity through tax reliefs, building on the existing Super Deduction, Freeports, and R&D tax measures?

We have yet to see the evidence that the government is taking full advantage of its post-Brexit freedoms.

Modernising the tax system may also be on Sunak's mind. That doesn't necessarily mean simplification, but rather a more considered route to digitalisation, including Making Tax Digital for Income Tax and Corporation Tax.

What specific measures we know about so far:

• The furlough scheme and the Self-Employed Income Support Scheme both ended on 30 September 2021, with a new focus on the Kickstart scheme for young people.
• 1.25% tax rise on dividends and NICs from April 2022
• Personal tax thresholds, CGT IHT etc. limits all frozen until 2026 
• Ending of the £20 a week rise to universal credit on 6 October 2021
• From April 2023 - Corporation Tax rate rises to 25% on profits from the current 19%. Small profits rate of 19% continues for profits below £50,000. Taper above £50,000 to £250,000
• 3-year carry back of losses for corporation tax purposes continues
• Super Deduction in place until April 2023 so that companies can claim 130% of their new machinery cost as a tax deduction
• Annual Investment Allowance falls from £1m to £200,000 on 1 January 2022
• Basis period reform for unincorporated businesses from April 2024 so that their profits are taxed on an actual basis rather than based on their accounting year end.
• 8 new Freeports (including Plymouth) with simpler planning and easier tariffs.
• Plastic Packaging tax begins on 1 April 2022
• Residential Property Developer Tax from April 2022.
• Making Tax Digital for Income Tax delayed until April 2024.

Consultations

Various consultations were issued in March and Tax Legislation Day in July.

So we may see announcements on:

• Business rates reform
• Residential Property Developer Tax rate setting.
• Pension tax reform
• Trust tax reforms
• Carbon emissions tax
• VAT administrative reforms post Brexit
• Capital allowance reforms for buildings and structures

On a wider perspective, the government has also issued a consultation on making flexible working for employers and employees the default position. The consultation closes on 1 December 2021.

What may be announced - speculation and possibilities

• Increase in the National Living Wage to £9.42 from April 2022? (Currently £8.91 for those aged 23 or over).
• New Covid-related measures to help businesses through the winter?
• Setting in motion a change to the UK tax year end date to 31 March or 31 December, following the publication of an OTS report on the issue?
• Increasing the rates and scope of Capital Gains Tax?
• Business rates holiday to continue from 1 April 2022?
• Extension of the reduced rate of VAT for the hospitality sector?
• Cutting the earnings threshold at which graduates begin repaying student loans?

The Scottish government will hold its Budget on 9 December 2021.

Spending Review

On public spending, the Chancellor is looking for government departments to reign in their outgoings:

"Departments have therefore been asked to identify at least 5% savings and efficiencies from their day-to-day budgets as part of these plans, which will be reinvested in our priorities."

Update 4 October 2021

As a prelude to what may be announced in the Budget, the Chancellor set out his vision on 4 October 2021 at the Conservative Party conference. His speech begins at 6.50.

He said he wanted to cut taxes, but only when the public finances are on a "sustainable footing".

Extracts from his speech:

“I believe in fiscal responsibility. Just borrowing more money and stacking up bills for future generations to pay is not just economically irresponsible; it is immoral. Because it’s not the state’s money, it’s your money.

There can be no prosperous future unless it is built on the foundation of strong public finances. And I have to be blunt with you, our recovery comes with a cost. Our national debt is almost 100% of GDP, so we need to fix our public finances.

Whilst I know tax rises are unpopular, some will even say un-Conservative. I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt. Anyone who tells you that you can borrow more today and tomorrow will simply sort itself out just doesn’t care about the future. Yes, I want tax cuts. But in order to do that, our public finances must be put back on a sustainable footing.”

Keep up to date with developments

Bishop Fleming will be covering the announcements and bringing analysis of the key measures on the day, and the days following as the implications of the measures become clear.

Join us for our live webinar on 28 October 2021, 9.30am to 10.30am, where our panel of tax experts will be analysing the announcements and commenting on how these may affect you.

[Gary Mackley-Smith]