Budget 2021: Key Points

Chancellor Rishi Sunak delivered the Budget in the House of Commons yesterday, announcing the government’s tax and spending plans, in a bid to help the UK’s economy recover from the COVID-19 crisis.

We have summarised the key points in this newsletter, but you can also download our full budget summary by clicking the button below.

New announcements with immediate effect

  • 30-day reporting and payment deadline for CGT on UK residential property extended to 60 days for transactions that complete on/after 27 October 2021 (the deadline is similarly extended where non-residents dispose of other UK land and buildings)
  • High Income Child Benefit Charge, gift aid donations and a limited number of pension charges are to be brought within the discovery assessment regime; this will apply retrospectively
  • Cross-border group relief for corporation tax to be abolished with effect from 27 October 2021 within the EEA
  • Increases to various cultural tax reliefs (for museums, theatres and orchestras) from 27 October 2021

New announcements taking effect later

  • 100% Annual Investment Allowance for qualifying plant and machinery – limit to remain at £1 million until 31 March 2023
  • Residential Property Developer Tax to be introduced from 1 April 2022: 4% of profits above £25m that are derived from UK residential property development
  • Car fuel benefit multiplier for 2022/23 is £25,300
  • Van benefit charge for 2022/23 is £3,600 and the van fuel benefit charge is £688
  • National Insurance Contribution (NIC) thresholds for 2022/23 increase by 3.1%, except the Upper Earnings Limit for Class 1 and Upper Profits Threshold for Class 4, which are both frozen
  • R&D tax relief to be reformed from 2022/23, and the scope will be extended to include data costs and cloud computing
  • Corporation tax loss relief rules to be amended to ensure the legislation works as intended for companies adopting IFRS 16
  • Consultation has been launched on corporate re-domiciliation, to make it easier to relocate to the UK
  • The Government is continuing to explore a UK-wide online sales tax, the revenue from which would be used to reduce business rates for retailer
  • ISA investment limit unchanged for 2022/23 at £20,000 (£9,000 for Junior ISA)
  • Annual Tax on Enveloped Dwellings (ATED) rates rise by 3.1% from April 2022
  • Reform of basis period rules for unincorporated business and LLPs is to proceed (2023/24 will be the transitional year)
  • Normal minimum pension age: Finance Bill 2021-22 will increase the earliest age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge from 55 to 57. This increase will have effect from 6 April 2028.
  • NLW/NMW: The National Living Wage (NLW) will increase to £9.50. The National Minimum Wage (NMW) for young people and apprentices will also rise. There are also changes to the Universal Credit taper.
  • Temporary reliefs for Business Rates for small businesses in 2022/23, with longer term reform of the system and reliefs for expenditure to be introduced in April 2023
  • Reform of Air Passenger Duty from April 2023: decreases for domestic flights and increases for ‘ultra-long haul’
  • Consultation for fundamental reform of alcohol duties, including incentives for pubs by reducing the duty on draught alcoholic drinks

Confirmation of matters previously announced

  • National Insurance Contributions (NIC) and dividend tax rates to rise by 1.25% from April 2023 to help fund health and social care (NIC rates will return to current rates for 2023/24, when the separate Health and Social Care Levy is introduced)
  • Structures and Buildings Allowance – changes to Allowance Statement requirements
  • Notification of uncertain tax treatments’ will be introduced for large businesses from 1 April 2022, requiring HMRC to be told if they take a tax position in their returns for VAT, corporation tax or income tax (including PAYE) that is uncertain
  • New late submission and payment penalty regimes to be introduced for VAT (for APs beginning on or after 1 April 2022), MTD ITSA from April 2024 and other ITSA taxpayers from 6 April 2025
  • Changes to the ‘Scheme Pays’ reporting deadline from 6 April 2022, where a taxpayer wishes their pension scheme to meet an Annual Allowance tax charge above £2,000
  • Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to be introduced from 2024/25, with an extra year’s delay for general partnerships.
  • Minimum pensions age to access private pensions increases from 55 to 57 from 6 April 2028
  • Dividend tax rate: As already announced, dividend tax rates will increase by 1.25% from 6 April 2022. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35%.