Autumn 2021 Budget Highlights for Businesses
Rishi Sunak's Autumn Spending Review Highlights for Businesses
A budget for capital investment, innovation, sustainability and lower-paid workers.
The Treasury has introduced its first set of changes to business rates in the UK following an 18-month long consultation, as part of longer term plans to "make the existing system fairer".
"From 2023, every single business will be able to make property improvements - and, for 12 months, pay no extra business rates."
The chancellor Rishi Sunak announced:
- the multiplier for calculating business rates will be frozen for 2022 and 2023, saving businesses a total of £4.6bn over the next five years.
- adjustment to the timing of revaluations, which will move to every three years from 2023, down from the current rate of every five years.
- measures to support investment in green technologies as well as decarbonisation of buildings used for work include exemptions for items such as solar panels and wind turbines, as well as a 100 per cent relief for low-carbon heat networks that have their own rates bill. The Treasury estimates this is worth almost £750m over the next five years.
- transitional relief, which limits how much a rates bill can change each year as a result of revaluation, will be extended to 2023.
- extension of the small business rates relief scheme, which aids ratepayers who have lost some or all of their small businesss rates relief due to an increase in their property’s value, by capping the increase at a percentage of the asset’s value.
- a tax cut worth £1.7bn for certain retail, hospitality and leisure properties between 2022 and 2023.
The Treasury will continue to consider the arguments for and against an online sales tax which would raise revenue to fund the reduction in other business rates.
The Treasury will consult on the online sales tax shortly.
(Source: [email protected])
Increased rate of corporation tax to 25% will become effective from April 2023. Smaller companies will benefit from a new Small Profits Rate and it is expected that only 10% of companies will pay the new higher rate of 25%.
The Personal Allowance and basic rate income tax limit are to be frozen at their 2021/22 levels for the next five years (up to and including 2025/26).
The Government intends to set the Personal Allowance at £12,570, and the basic rate limit at £37,700. The point that you start to pay higher rate tax, known as the higher rate threshold (the Personal Allowance added to the basic rate limit) will therefore be £50,270 for these years.
NI contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate income tax threshold at £50,270 for these years.
Pensions – lifetime allowance
There is a limit on the total value of pension benefits you can build up without getting a tax charge when you come to draw your pension. This limit is known as the lifetime allowance and is currently £1,073,100. The Government intends to remove the link to the Consumer Price Index increase for the next five years and freeze the standard lifetime allowance at £1,073,100.
The Government intends to freeze the Capital Gains Tax annual exempt amount at its current level of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the next 5 years (up to and including 2025/26).
The £20-a-week Universal Credit uplift will continue for an additional six months.
Planned increases to alcohol duties have been suspended for a second year in succession and fuel duty has also been frozen for the 11th consecutive year, which will be welcome news as the economy begins to re-open.
Tobacco duty had previously increased by 2% plus inflation, with the rate for hand-rolling tobacco increasing by 6% plus inflation.
Companies and Small Businesses
Corporation tax rates are to set rise from 19% to 25% in April 2023. The Government will introduce a new Small Profits Rate of 19% for companies with annual profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate of 25% reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
New ‘Super Deduction’ tax relief in a bid to encourage investment. Applies to companies and will not be available to sole traders or partnerships.
This measure will temporarily introduce increased reliefs for expenditure on plant and machinery. For qualifying capital expenditure incurred from 1st April 2021 up to 31st March 2023, companies can claim in the period of investment:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances. This will generate an effective reduction in tax of 24.70p for every £1 spent
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances (items such as integral assets like hot and cold water systems). This will generate an effective reduction in tax of 9.5p for every £1 spent
The annual investment allowance (AIA) limit will be £1 million for the period from 1st January to 31st December 2021.
As the super deduction will not be available to sole traders and unincorporated businesses, they will continue to claim the AIA on eligible capital expenditure.
It is worth noting that companies with special rate expenditure will only benefit from a 50% allowance. They may be better off allocating the AIA to special rate assets instead.
According to accountancy firm MHA MacIntyre Hudson, if you spend £100,000 on equipment for your small business, the corporation tax deduction will be £130,000, giving corporation tax relief at 19 per cent on £130,000, which is £24,700. Normally such expenditure would either fall within a company’s annual investment allowance and produce relief of only £19,000 or alternatively be tax-relieved at 18 per cent of the cost per annum
To help viable businesses, which have found themselves in a loss-making position, the trading loss carry back rules for unincorporated business and companies will be temporarily extended from one year to three years.
This will enable carry back of relief for losses of up to £2 million in each of 2020/21 and 2021/22 for unincorporated businesses and companies which aren’t a member of a corporate group.
Losses for companies which are members of a corporate group may be limited to £200,000 in some cases, although the group, as a whole, should still be entitled to the £2 million cap.
From April 2021, the financial incentive to employ new apprentices in England will increase from £1,500 or £2,000 depending on age, to £3,000 per apprentice. This is in addition to the existing £1,000 payment provided for all new 16-18 year-old apprentices, and those under 25 with an Education, Health and Care Plan
The Government has also ring-fenced an additional £126 million for a new traineeship scheme designed to help more 16-24 year-olds in the 2021/22 academic year secure work placements. This investment is expected to cover the hiring of 40,000 additional traineeships in the coming months.
Research & Development (R&D)
Small and medium sized businesses will see a cap of their R&D tax credit of £20,000 plus three times the company’s total PAYE and NIC liability for accounting periods beginning on or after 1st April 2021. The definition of qualifying expenditure for R&D tax relief will be expanded to include cloud computing and dataset purchase costs.
The Chancellor also announced a wide-ranging consultation on research and development (R&D) tax relief to ensure the UK remains a competitive location for cutting edge research.
Help to Grow Scheme
As part of the Chancellor’s vision for an investment-led recovery, the new Help to Grow scheme will provide industry leading support to growing businesses. The Help to Grow Management programme will offer world-class management training via business schools, with the Government contributing to 90% of training costs. Meanwhile the Help to Grow Digital programme will provide free expert training and will be delivered by a combination of a voucher covering up to 50% of approved software costs up to a maximum of £5,000 with free online impartial advice.
Business and workers
The Spending Review includes key measures to put pounds in the pockets of British workers and support businesses looking to invest and grow. These include:
- a National Living Wage increase up to £9.50 an hour to be introduced from April 2022, giving £1,000 pay rise to two million of the lowest paid workers across the UK. The change will make the new National Living Wage rate the highest ever, as significant progress is made towards ending low pay
- the extension of the Recovery Loan Scheme by 6 months – with the scheme having already supported the recovery of UK businesses with over £1 billion of government-backed loans since April
- £1.6 billion of finance for new and growing businesses, to be delivered via the government’s British Business Bank over the next 3 years. This includes £312 million for 33,000 new Start-Up Loans to business owners across the UK and £307 million for businesses in the North, Midlands and South West through expanding the Regional Funds programme. The government will also provide £52.5 million for the Regional Angels Programme
- business rates exemption for green property improvements, including solar panels and heat pumps, to help businesses invest to make buildings more energy efficient
- the launch of the Help to Grow: Digital scheme in December, providing small businesses with free, impartial online support on how to use digital technology to boost their performance. It will also offer small businesses access to discounts worth up to £5,000 towards the costs of buying approved software.
Incorporated businesses can now register their interest for the scheme here
The UK is a world leader in science and innovation, and this year’s Spending Review includes commitments which will cement our status as a science superpower. These include:
- £5 billion increase in government investment in research and development per year by 2024 to 2025 to invest in the science, research and innovation that will deliver economic growth across the UK. The UK will meet its target of investing £22 billion or 2.4% of total GDP in research and innovation by 2026 to 2027
- £354 million for life sciences, including improving our domestic vaccine manufacturing and development capabilities
- £817 million investment in the production and supply chain of electric vehicles in the North East and Midlands
- £24 million to level up manufacturing by helping smaller manufacturers to adopt industrial digital technology through the Made Smarter Adoption scheme
- research and development tax relief for businesses looking to increase investment, with relief expanding to cover cloud computing and data costs, meeting the needs of businesses. This relief will be focussed on domestic investment from April 2023, ensuring that innovation and jobs remain in the UK. There will also be tax relief for cutting-edge research in fields such as genome sequencing, machine learning and data analytics