Autumn Budget 2021 was set in the context of a much-improved fiscal outlook, primarily due to a faster than previously anticipated recovery in economic activity and the labour market across the UK. While acknowledging the challenges from ongoing global supply chain issues and labour shortages (inevitably leading to inflationary pressures over the short term) the Chancellor took the opportunity to highlight that the UK economy is performing strongly and now expected to regain its pre-pandemic size by the turn of the year.

Given the two significant revenue raising measures already announced this year, namely the increase in the main corporation tax rate to 25% from 2023 and the announcement of the NIC increases and new Health and Social Care Levy coming into effect in April 2022, businesses will welcome the lack of any additional revenue raising measures. Apart from some relieving measures aimed at low income households, there was very little in today’s Budget in the area of employment taxes or individual taxation more generally (with no changes to income tax or capital taxes rates). 

Tax measures announced

Of the various tax related measures announced today, the most noteworthy are:

  • Amendments to the current R&D Tax credit regime to (i) expand the definition of qualifying expenditure to include data and cloud computing costs; (ii) ensure that relief is focussed on R&D activity actually taking place in the UK rather than third countries and (iii) measures to target abuse of the regime and improve compliance. Further details will be provided in the Finance Bill 2022-23 and these changes will take effect from April 2023.
  • A substantial reform of the UK’s tonnage tax system effective from April 2022 to encourage businesses to re-base their headquarters in the UK.
  • Confirmation that the new Residential Property Developer Tax, effective from April 2022 has been set at 4% on annual profits exceeding £25 million (in addition to the main corporation tax rate).
  • Confirmation that the Bank Corporation tax surcharge will be set at 3% from April 2023 (in addition to the main corporation tax rate).
  • Extension of the temporary £1 million level of the Annual Investment Allowance to 31 March 2023.
  • Improvements to several existing tax reliefs applicable to organisations within the Arts & Culture sector.
  • The introduction of a new reduced domestic band for Air Passenger Duty covering flights within the UK along with a new ultra-long-haul rate band covering longer destinations.
  • A fundamental reform of the UK Alcohol Duty System to align duty rates going forward to the level of alcohol content.
  • An interim arrangement measure to extend the existing second-hand margin scheme for car imports to NI from GB. 

More information

KPMG Belfast’s tax team has prepared a concise overview of the main tax items in today’s Budget affecting businesses and individuals, all of which will have application in Northern Ireland unless indicated otherwise:

Get in touch

If you have any queries on the topics covered in our UK Autumn Budget 2021 report, please contact Johnny Hanna, partner in charge, KPMG in Belfast.