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October 2021 Budget

28th October 2021

The Chancellor of the Exchequer, Rishi Sunak delivered his third Budget on Wednesday 27 October 2021.

The good news for the Treasury was that forecast borrowing over the next 5 years will not be as high as originally planned in March 2021.

Overall Government debt will now fall as a percentage of GDP but continue to rise in cash terms.

Also, economic growth is expected to rise to 6.5 per cent and inflation is expected to peak at 4 per cent next year.

Fears of significant unemployment rises because of the Covid-19 pandemic do not appear to be resulting.

The main tax points of interest of the Budget are as follows.

Income Tax

There was no change to either the basic rate or higher rates of income tax though the Chancellor did reduce the taper rate by 8 per cent on Universal Credit.

Corporation Tax

The Chancellor confirmed the rates of Corporation Tax that will come into effect from April 2023 and were announced in his previous Budget. The main rate of corporation tax will be 25 per cent but remain at the current 19 per cent for companies posting profits below £50,000.

National Insurance

The Chancellor referenced again the planned rise next year to National Insurance of 1.25 per cent which will subsequently be replaced by a new Health and Social Care Levy.

VAT

There were no significant announcements on VAT with the registration threshold remaining at £85,000 and deregistration threshold at £83,000.

Capital Gains Tax

In a welcome measure, the Chancellor extended the reporting deadline on capital gains on the sale of residential property from the current 30 days to 60 days.

Other measures

On Business Rates there will be a 50% relief for businesses in the hospitality and leisure sector up to a maximum of £110,000.

The Annual Investment Allowance for Capital Allowances will remain at £1 million for the year to 31 March 2023.

Research and Development reliefs will now be targeted to UK based activity only and the eligible expenditure will now extend to include data costs and cloud computing.

On Duties the fuel duty rise is frozen once again, and alcohol duties will now work on the premise of the stronger the drink the higher the rate applied.

Air Passenger Duty will fall for UK internal flights.

The previously leaked rise in the National Minimum Wage to £9.50 per hour from April 2022 was confirmed.

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