Other measures for individuals

A roundup of further announcements in Autumn Budget 2021 impacting individuals.

A roundup of further announcements in Autumn Budget 2021 impacting individuals.

In addition to the key measures discussed elsewhere in this edition of Tax Matters Digest, the Chancellor made a number of other announcements in the Budget that will have an impact on individuals. These include confirmation that the Government is to proceed with changing the basis period rules from a ‘current year basis’ to a ‘tax year basis’. This will impact individuals, trusts, partnerships and others with trading income that is subject to Income Tax. This will change the underlying profits or losses subject to tax and bring forward the time at which tax on such profit is due for payment. This article also covers the extension of the period to report and make payments of Capital Gains Tax (CGT) for disposals of UK land and property.

Income tax basis period reform

Following the announcement in September that the implementation of the proposed income tax basis period reform would be delayed by one year, as discussed in a previous Tax Matters Digest article, the Government released some further details in Autumn Budget 2021. Legislation will be introduced in the forthcoming Finance Bill to introduce the new rules from 6 April 2024 with a transition year in 2023 to 2024. A full response to the recent consultation will be published on 4 November 2021 but the announcement in the Budget headlines some of the changes the Government are making in response to the consultation responses:

  • For businesses with higher profits in 2023 to 2024 as a result of the change in basis, the Government will legislate to automatically spread the transitional period profits over a five year period, with the ability to elect out of spreading and accelerate the charge should the business wish to do so. In the original proposals, an election had to be made to spread the charge; and
  • There will be more flexibility in the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and benefits, although no overlap profits will be carried forward into the new tax basis period.

We will provide further analysis once the full response has been issued. For further details of the proposed reform see our previous Tax Matters Digest article: ‘Income tax basis period reform and earlier payment of tax’.

Extension of period to report and make payments of CGT for disposals of UK land and property

Following the recommendation made by the Office of Tax Simplification (OTS), the time-limit within which UK resident individuals have to report and pay any CGT due on the disposal of UK residential property has increased from 30 to 60 days after completion. This will also apply to non-UK residents making any direct or indirect disposal of UK land, including both residential and commercial property. It has also been clarified that, for UK residents, where a gain arises on a disposal of a mixed-use property only the portion of the gain that is the residential property gain has to be reported and paid within this time limit. This change applies to disposals completing on or after 27 October 2021.