28 October 2021
In this summary we’ve explained the key developments and changes from the Chancellor’s announcement on 27 October 2021. To download a pdf version of our October 2021 Budget Summary click the green download pdf button on the right.
Without a change in government, it is very rare to have two Budgets in one year. However, 2021 is no ordinary year and now that many of the government’s support measures for businesses have ended, there was always going to be speculation this autumn about what happens next?
Since the summer there have been small signs that the UK’s fragile economy is taking initial steps towards recovery. There are many obstacles in the way, though, with stock and staff shortages, Brexit issues and, more recently, gas prices – to name but a few.
In the three months to August 2021, job vacancies rose above 1 million for the first time since records began. This is obviously putting pressure on salaries as employers compete to attract and retain staff. Higher salaries and other factors are also affecting inflation and there is a general consensus that prices will be forced to rise.
Over the past 18 months, the level of government financial support and the scale of the vaccine roll- out has been impressive, but it comes at an eye-watering cost to the Treasury. Already, a proposed increase to national insurance and the dividend tax have been announced to fund social care, while back in March it was announced Corporation Tax rates will rise from April 2023.
In the run-up to 27 October, we were told this would be the Build Back Better Budget and that the Chancellor’s ambition is to return public finances to a sustainable footing over the medium term. That certainly means cuts in government spending (departments have been told to identify 5% savings in their budgets at the very least).
It will also mean there will be tax changes along the way to replenish the Treasury coffers. In September, the Institute for Fiscal Studies director Paul Johnson called this “the biggest tax-rising year in many decades”.
In our Budget Summary, we have given both overviews and detailed information for personal, business and property-related taxes.
Key highlights from the October 2021 Budget
- Substantial amounts of revenue over the next five years will be raised from previously announced measures, such as the freezing of tax allowances and the introduction of the Health and Social Care Levy.
- HMRC will be able to make 20% top-up payments for 2024/25 onwards in respect of contributions made by low-earning individuals saving in a pension scheme under a Net Pay Arrangement.
- From 27 October 2021, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
- Businesses will benefit from several changes to the business rates regime, including the freezing of business rates multipliers for a second year, from 1 April 2022 until 31 March 2023.
- Income tax basis periods will be reformed so that a business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.
- Qualifying expenditure for tax relief on research and development will be extended to include data and cloud costs.
- Alcohol duty will be restructured so that all beverages will be taxed in direct proportion to their alcohol content.
- A new domestic air passenger duty band will cover flights within the UK at a rate of £6.50 for 2023/24. A new ultra-long-haul band will apply to flights to destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.
As the Treasury begins to release the papers behind the headlines, the Shipleys team will continue to closely monitor what these mean for our clients. We’ll be sharing our conclusions and advice on our website, in our Shipshape magazines, in our Tax Facts card (which will be out later this year) and in our conversations with clients.
In the meantime, if you wish to discuss how this Budget will impact on you, please do talk with your usual Shipleys’ contact. Our key focus remains to help our clients navigate the changes smoothly and thrive.
This Budget Summary is based on the Chancellor’s Budget Statement on 27 October 2021, supplemented by information from official publications.
It reflects our understanding of proposed changes to tax law and practice at the date of publication, but is not a complete and definitive guide. The Budget proposals may be amended before the Finance Bill becomes law.
Specific advice should therefore be obtained before taking action, or refraining from taking action, on the basis of this information.
© 2021 Shipleys LLP