Autumn Budget 2021

Chancellor unveils ‘industrial strategy’ Autumn Budget to reboot the economy.

Chancellor unveils ‘industrial strategy’ Autumn Budget to reboot the economy.

On 27 October the Chancellor delivered the second Budget of 2021. Its main objective: to reboot the economy post COVID-19. The Autumn Budget revealed the Treasury’s pivot away from low taxes and spending restraint to direct intervention in supporting particular industries. No fundamental reforms of the tax system were announced and overall, it was a quiet Budget for most. Nevertheless, there were a number of changes to select areas of the tax system that will be of interest to businesses and individuals. In this Autumn Budget special edition of Tax Matters Digest we discuss the key measures that were announced. The next step in the tax policy cycle is the publication of the Finance Bill on 4 November 2021 and then, at some point “later in the autumn” the Government has promised it “will bring forward a further set of tax administration and maintenance announcements” similar to ‘Tax Day’ which followed the Spring Budget.

Following major announcements at the Spring Budget, including the increase to the rate of corporation tax, the Autumn Budget was relatively quiet by comparison. As promised, the Banking Surcharge was reviewed, and will be reduced to 3 percent from 1 April 2023. The long-awaited Government response to the Business Rates Review was also published, revealing that the current system is to be retained, but with some key reforms from April 2023. Meanwhile, the possibility of an online sales tax will be explored further, with a consultation promised.

Encouraging investment and innovation were key themes in the Chancellor’s speech, with the temporary £1 million Annual Investment Allowance to be further extended to 31 March 2023. Research and Development (R&D) tax reliefs are to be reformed to improve their effectiveness and refocus their scope.

Some of the day’s announcements had previously been unveiled including a new Residential Property Developer Tax and the recently announced Health and Social Care Levy and associated increase to National Insurance Contributions.

From an employer’s perspective, further announcements included an increase in the National Living Wage to £9.50 per hour for those aged 23 and over from 1 April 2022 and pension tax relief for low earners in net pay arrangements.

However, there was surprisingly little on the environment, particularly ahead of COP26. Nor was any attention given to addressing how wealth and the way we work are taxed. These omissions will likely weigh heavily on the minds of businesses and individuals.

On our dedicated Autumn Budget 2021 site, we give our initial insights. There you can find our handy On a Page summary to get you up to speed quickly on the key announcements. You will also find videos where our tax specialists discuss the implications of the Autumn Budget for multinationals, employers, individuals, and private businesses as well as a live video recorded by Tim Sarson, our UK Head of Tax Policy, with Alan Turner and Jo Bateson where they shared their initial reactions to the Budget announcements.

You can find further commentary on some of the key measures announced at the Autumn Budget in this edition of Tax Matters Digest as follows:

Budget changes to R&D incentives
The Chancellor has announced changes to modernise and re-focus R&D tax incentives for UK innovation.

4 percent Residential Property Developer Tax confirmed
The Chancellor’s Budget confirmed the introduction of a new tax on the largest residential property developers with effect from 1 April 2022.

Banking surcharge to reduce to 3 percent
The Chancellor has confirmed a reduction in the banking surcharge rate from 8 to 3 percent with effect from 1 April 2023.

Fundamental Review of Business Rates in England concludes
Key Business Rates headlines include a move to three yearly revaluations and a discount of up to 50 percent for retail, hospitality, and leisure.

Real impact of minimal tax change for individuals and what lies ahead
Don’t underestimate the impact of fiscal drag raising significant sums over the next four years.

You will also find some round-ups of other Budget measures in this edition. For a more detailed understanding of how the Autumn Budget could affect you or your business, please speak to your usual KPMG in the UK contact.