Daniel Grainge LLB (Hons) FCA CTA
- Partner and Head of Tax
- +44 (0)330 124 1399
- Email Daniel[email protected]
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Chancellor Rishi Sunak today delivered his Budget and spending plans for the next 12 months. It was a Budget with an eye towards COVID yet looking to a “new age of optimism”.
It was in many ways a highly unusual Budget with the Chancellor finding not just the fabled magic money tree but an entire magic money forest. The spending was there but the tax increases that often follow were missing. The increase in Corporation Tax to 25%, effective from April 2023, and the 1.25% Health and Social Care Levy, announced in September, were notably not mentioned again.
And yet for all the headline-grabbing announcements on infrastructure, health and social care, for education, and science and technology, a serious and troubling question remains. How will the Chancellor’s programme be delivered?
With unemployment falling, with supply chains constrained, and with business confidence high, the organisation and the people needed to deliver the Government’s ambitious investment programme appear to be missing. The ability to deliver on many of these grand promises has to be questioned.
There are, as always, clear winners and losers from today’s Budget. Below we touch on just a few of those. Further detail will, of course, emerge in the detail of the Budget and we will share these with you in our Budget webinar on 29 October.
In the meantime, if you have any questions arising from today’s Budget do get in touch with your usual contact.
Smaller retail and hospitality businesses
Business rates have long been a source of frustration for retailers and hospitality businesses. The changes announced – which include a revaluation every three years and a 50% discount capped to £110,000 – will be welcomed.
Alcohol producers, pubs and consumers
A major reform of alcohol duties was always designed to grab headlines. Under the new rules duty paid will link directly to alcoholic strength, and with tax reliefs on draught beers.
UK wine and sparkling wine producers will see lower duties, as will craft beer and cider makers, which means lower prices for drinkers. However, high strength drinks, including port and gin, will cost more.
Museums, galleries, and concert venues
Museums, libraries, galleries, and concert venues will all benefit from £250m of tax reliefs over the next two years to help them recover from the COVID pandemic. In addition, £800m is to be made available to help renovate local cultural institutions across the UK.
Families receiving Universal Credit
Perhaps in response to criticisms on removing the £20 a week uplift in Universal Credit which was introduced in response to the COVID pandemic, the Chancellor has made major changes to the taper on Universal Credit. The change, more generous than expected, will see as much as a £1,000 increase per year (approximately £19.25 per week) to over four million UK households.
Businesses involved in research and development
R&D tax credits are to be extended to businesses incurring costs on cloud computing and data sciences for the first time. However, businesses that subcontract their R&D outside of the UK will lose access to that relief.
Pension top-ups for low earners
Those earning less than their personal allowance can miss out on tax relief if they are members of pension schemes where employee contributions are collected from gross pay before tax. HMRC will identify these individuals and each will become entitled to a top-up contribution from 2025/26, averaging £53 a year. However, there appears to be no intention to backdate this.
As the eyes of the world turn to Glasgow on 1 November for COP26, many might question the Government’s decision to reduce air passenger duty on flights within the UK. And those looking for any increase in petrol or diesel duties to combat vehicle emissions will have been disappointed although perhaps not surprised with no Chancellor in recent memory increasing prices at the pumps.
Those aged looking to access their pension
From 6 April 2028 those wishing to access their pensions without incurring an unauthorised payments tax charge will have to wait for their increased normal minimum pension age of 57, up from the current age of 55.
Large Residential Property Developers
Residential property developers with profits over £25m will be required to pay a 4% tax on profits from 1 April 2022. The revenues generated will be used to make safe cladding on high rise buildings.
Large hospitality and retail businesses
Business rates for retail and hospitality businesses on the high street will be able to claim a discount of 50% on their business rates up to a maximum of £110,000. Whilst this will benefit smaller retailers and hospitality businesses, it is unlikely to help larger businesses in the sector that often anchor high street and shopping centre destinations. Also, the changes do not appear to challenge the perceived mismatch between on-line and high street retailers.
Businesses with large numbers of employees on the National Living Wage
Whilst workers being paid the National Living Wage will welcome the increase to £9.50 per hour from April 2022, businesses with large numbers of employees on the National Living Wage may not. The 6.6% increase is much closer to 8% when National Insurance and the new Health and Social Care Levy are taken into consideration, representing a sharp increase in costs. This may give businesses with a fixed income, for example social care providers, very real issues.
Join our Budget question time – Connecting the dots webinar on Friday 29 October, where our panel of tax and finance experts will be on hand to answer your Budget related questions.
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