The first autumn Budget for three years was a three-part presentation. The Chancellor’s well-trailed speech was accompanied by the first multi-year Spending Review since 2015 and the latest Economic and Fiscal Outlook (EFO) from the Office for Budget Responsibility (OBR).
Mr Sunak’s previous two Budgets had been dominated by the pandemic, which has wreaked havoc with the public finances. Third time around, the backdrop was brighter, at least relatively speaking.
In addition to recent helpful borrowing data, the Chancellor had the £42 billion of tax increases he announced in March and September. The extent of a further windfall was revealed in the Budget Red Book, which shows that suspending the State pension ‘triple lock’ next April will save £5.4 billion in 2022/23, rising to £6.7 billion four years later. It is therefore not surprising that few new tax-raising measures emerged in Mr Sunak’s second formal Budget of 2021. The reports from the Office for Tax Simplification on inheritance tax and capital gains tax have been left to gather more dust on the shelves of 11 Downing Street.
Mr Sunak was in spending rather than taxing mode on this occasion. He made two significant changes to Universal Credit, partially reversing the impact of the £20 a week reduction that took effect earlier this month. There were also cuts to business rates, air passenger duty and the cost of a pint of beer.
The Chancellor took advantage of better than OBR-projected economic performance both to spend more and to put some money aside. He must hope that his war chest is enough to cover whatever COVID-19 and rising inflation/interest rates conspire to deliver in the coming year.
- Substantial amounts of revenue over the next five years will be raised from previously announced measures, such as the freezing of tax allowances and the introduction of the Health and Social Care Levy.
- HMRC will be able to make 20% top-up payments for 2024/25 onwards in respect of contributions made by low-earning individuals saving in a pension scheme under a Net Pay Arrangement.
- From 27 October 2021, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
- Businesses will benefit from several changes to the business rates regime, including the freezing of business rates multipliers for a second year, from 1 April 2022 until 31 March 2023.
- Income tax basis periods will be reformed so that a business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.
- Qualifying expenditure for tax relief on research and development will be extended to include data and cloud costs.
- Alcohol duty will be restructured so that all beverages will be taxed in direct proportion to their alcohol content.
- A new domestic air passenger duty band will cover flights within the UK at a rate of £6.50 for 2023/24. A new ultra-long-haul band will apply to flights to destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.
We now look forward to the Scottish budget on 9 December and expect further support for businesses and COP26 to influence budget decision-making.