Download the Budget Summary

Yesterday’s budget brought less tax content than many predicted, yet provided some encouragement for a broader range of those who will benefit from reliefs and plans for spending.

The theme of the announcements was that of high spend and as tax increases had been announced in recent weeks and within the Spring budget, no unexpected tax increases were revealed.  As the tax intake from the high tax rates will contribute towards the high spending plans, the Government are currently planning to use about half of the windfall declared by the Office of Budget Responsibility (“OBR”), due to recent recovery progress which was better than expected.

Please download the budget summary here, the main changes comprised:

A temporary Business Rates Relief is available for eligible retail, hospitality and leisure properties in England.

R&D tax relief to be extended to include cloud computing and data costs from 2023 and R&D relief will only be available if carried on in the UK, again from 2023 – however the additional R&D investment of £22 billion has been delayed.

The Annual Investment Allowance will be extended to 31 March 2023 which will help some businesses as it was due to end on 31 December 2021 but SME’s are unlikely to benefit.

The announcement of the removal of the taper method for Universal Credit was welcomed for relevant individuals and the great news for 2.5 million lower paid workers is the increase to the National Living Wage from £8.91 to £9.50 from April 2022. Yet, this will put pressure on many businesses, particularly those in the hospitality and leisure industries who are on a long road to recovery.

Alcohol duty reform was announced which taxes the strength of the alcohol plus reliefs for draught products along with a reduction on tax for sparkling wines and fruit ciders, for example. This is, however, subject to consultation.

A residential property developer tax has been proposed which charges 4% of additional tax on profits over £25 million from 2022 and is hence targeted at the larger housebuilders. This will be used to contribute to the large cost burden of removing unsafe cladding.

Only a matter of days before the COP26 climate change summit, there is a question mark around why the fuel duties were not increased alongside the reduction to air passenger duties for flights within the UK.  The measures were rationalised by Rishi stating that it wasn’t believed that it would help families or drivers and hauliers with the already rising fuel costs and that price reductions on internal flights would help towards connecting the UK for travel purposes and give a much needed boost to regional airports, from Inverness to Southampton. Even though there are higher duties for long haul flights, it will be interesting to gauge the reaction during the COP26 summit and understand other potential plans to achieve the Net Zero targets.

There was no mention of inheritance tax changes or capital gains tax reforms as many had predicted. The minor measure announced was an increase from 30 to 60 days in the reporting and payment deadline for CGT on disposal of UK residential properties, as recommended by the Office of Tax Simplification.

Little was addressed in respect of pensions at this stage other than a change to the draw down age, which is increasing from 55 to 57 after April 2028, yet it is still likely that there will be changes on the horizon for all three points, and more, as discussions continue.  It is also important to note that budget proposals may be amended in the Finance Act 2021/22 and consultations are still in progress such as the alcohol duty reforms, funding management services and online sales tax.

All in all, the message was “we feel your pain” and there was a spread of assistance for many sectors although some believe not enough.

For now, there are high taxes in a world where cost of living is increasing and though others will disagree, experts are of the general opinion that this is the right thing to do at this time to make further progress towards recovery and achieve required growth.

It is regularly stated that actions speak louder than words and this applies all around as businesses are going to need to look after themselves and optimise, where possible. Whilst individuals will need to take any opportunities they can with employment and support that is available.

If you have any questions or would like to discuss your own circumstances in more detail, please get in touch with your usual contact at Harold Sharp or email tax@haroldsharp.co.uk and we will be happy to assist.

 

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