Autumn Budget and Spending Review 2021

The Chancellor, Rishi Sunak, has today unveiled his Autumn budget that, he states, “backs businesses and builds a stronger economy.”

A number of measures, such as the increase to the Corporation Tax rate, were announced earlier this year in the Spring Budget.

Given the events of the last eighteen months, it was expected that measures would have to be taken to stabilise the economy, and we’ve outlined these below. While The Chancellor acknowledged that the taxation level is the highest it has been since the 1950’s, he did advise that is the governments plan to reduce taxation by the end of this parliament in 2024.

R&D

In line with The Chancellor’s pledge to invest in innovation, he has outlined several measures to boost R&D within the UK:

  • Reforming R&D to reflect the modern world – qualifying expenditure will now include data and cloud costs.
  • To ensure that the government is not subsidising R&D elsewhere in the world, tax relief for business R&D will be limited so that it only applies to UK activity.
  • Increasing public investment in UK R&D to £20bil by 2025.

The Chancellor also acknowledged that many UK businesses have at least one foreign-born co-founder, along with overseas staff, and the government wants to make it easier for talented individuals to work in the UK.

The new Scale-Up visa, which will launch in 2022, will allow for a fast-track application process for highly-skilled workers with a job offer from an eligible business (and a minimum salary of £33k.)

Additionally, the temporary increase of the Annual Investment Allowance to £1mil is set to remain in place until March 2023. This, along with the Super Deduction, is designed to encourage businesses to invest in the upcoming financial year.

Business Rates

The Chancellor confirmed that business rates will be retained, and emphasised the importance of a tax that raises £20bil in revenue each year. He has however, outlined plans to make business rates a fairer, and more supportive experience for businesses:

  • More frequent revaluations will take place – the time between each will reduce from 5 years to 3 years.
  • New investment relief to encourage businesses to invest in green technology (e.g., solar panels.)
  • Businesses who invest in property improvements, from 2023 onwards, will be granted a 12-month period in which they pay no additional business rates.

In a further measure, described as the “biggest single year tax cut to business rates in over 30 years”, The Chancellor announced that a business rates discount of 50% will be applied for businesses operating in the retail, hospitality and leisure sectors up to a maximum of £110k. This will be a welcome relief for the sector, which has been one of the hardest hit by the pandemic.

National Living Wage

A Living Wage increase from April 2022 of 6.6% was also announced, bringing the hourly wage for those aged 23+ to £9.50. The Chancellor announced that this would result in an approximate £1,000 pay increase per annum for full time workers.

Dividend tax rate

The current basic rate of 7.5% on dividend income is set to rise to 8.75%, with equal increases to the higher and additional rates (33.75% & 39.35%.) This change will take effect from 6th April 2022, and will impact anyone in receipt of dividend income, including company directors who remunerate themselves by way of dividends.

In addition to the dividend tax rate increase, the government also announced recently a UK-wide 1.25% Health and Social Care Levy

If you would like to find out more about the measure announced in the Autumn Budget, please contact us.