The UK economy
The Office of Budget Responsibility has lowered its forecasts for unemployment and economic damage caused by COVID-19. It now says that unemployment will peak at 5.2%, rather than 12%, and that the scarring caused by the pandemic will be 2%, rather than 3%.
The UK economy is growing faster than predicted, galloping along at 6.5% in 2021 – well above the previous forecast of 4%. The following years are forecast to grow at 6%, 2.1%, 1.3% and 1.5%.
Bad news usually follows good news and it is hardly a newsflash, but inflation is here. Chancellor Rishi Sunak reported it stood at 3.1% in September and it could rise – to 4% over the next 12 months.
To ease the cost burdens on the under pressure sectors of leisure, hospitality and retail, the Chancellor announced a new 50% business rates discount in England, up to a limit of £110,000 per business.
All sectors will have to budget in a higher minimum wage, though, with the headline national living wage rising to £9.50 per hour (that’s a 6.6% increase).
This is, of course, on top of the already announced significant 1.25% hike to employers’ National Insurance, which will come in next year to fund the health and social care levy.
Sunak also extended the temporary annual investment allowance of £1m until 31 March 2023, and announced a wider scope of the R&D tax credit to reward innovative domestic businesses.
As expected, there was no rise to income tax rates. Don’t forget the previously announced 1.25% increase to dividend tax rates and National Insurance.
There had been fears of capital gains tax (CGT) rises, which may have hit buy-to-let property investors. In fact, there was a minor change to this tax, but only to double the current 30-day deadline for paying tax on property disposals to 60 days. The thresholds remain the same.
There was good news for consumers on certain feel-good purchases – downwards movement on draught beer and cider (something publicans will appreciate, too) and simplification of tax on sparkling wines.
Guaranteeing the ire of environmentalists, Sunak granted passengers on domestic flights a reduction in air passenger duty. And, with fuel prices at record highs already, a planned rise to fuel duty was scrapped again.
As you’ll know, pensions are often touted as a means of levying stealth taxes around Budget time, and this year was no exception. However, nothing of note was announced.
That said, the continued freeze in the lifetime allowance will mean that steadily more people come into its scope up to and including the end of the 2025/26 tax year.
The Chancellor expects the Government to return to its pledge of spending 0.7% of UK GDP on overseas aid before the end of this Parliament.
And in the UK, the £2.6 billion announced under the levelling-up policy will have some positive effect in the third sector.
- £560m available for funding youth services in England over three years
- £150m for the community ownership fund, enabling 21 projects to benefit
- £850m will be handed over to safeguard galleries, museums, libraries and local culture in England.
Here to advise
If Autumn Budget 2021 raised any questions for you or your business, please do not hesitate to get in touch so we can help.