Autumn Budget announcement – a measured approach

With fanfare the Chancellor delivered a budget increasing Public Sector spending by £150bn, but what was the effect on the Private Sector?

Companies are already planning for Corporation Tax rising to 25% from April 2023 on profits more than £250,000. No further rate increases on Corporation Tax were announced. To this, companies are encouraged to take advantage of the tax super deduction on the cost of new plant and machinery providing a deduction against taxable profits equal to 130% of the cost of the assets.

Additionally, 100% capital allowances on the first £1m of expenditure on plant and machinery was extended to April 23.

Residential Property developers with profits >£25m per annum will be smarting following the introduction of a new 4% tax on annual profits.

Applying this new tax from April 2022 to fund the replacement of dangerous cladding creates a further funding requirement and complexity for residential property developers and will undoubtedly prevent some projects progressing. Advice will be needed on its operation before introduction.

The Chancellor continued his support for companies involved in innovation with a package of government support to keep the UK at the forefront of global innovation.

As part of this, R&D tax relief available to companies has been extended to include expenditure on cloud computing and data costs for the first time. Additionally, only expenditure on R&D activities undertaken within the UK will qualify for R&D tax relief from April 23. This is aimed at preventing the UK subsidising innovation that does not benefit the UK.

The UK’s Drinks industry will be able to access this innovation support and, at the same time, they will have to consider the new alcohol duties which will be applied dependent on the strength of the drinks produced.

The Arts and Culture sector has been provided further support through the doubling of Creative Tax Reliefs aimed at supporting museums, galleries, orchestras etc. to create new productions.

The urge to raise Income Taxes was resisted, with rates remaining at currently announced levels, together with the existing pension reliefs. However, the already announced Health and Social Care Levy will see an additional 1.25% of Employee NIC being suffered on employment income with employers also paying an additional 1.25% of Employer NIC. This levy, applying from April 2022, will also be suffered by those receiving dividends and earning income from self-employment.

Covid support for the Hospitality industry will continue with a 50% cut in business rates for 12 months. Additionally, a raft of changes to the determination of business rates have been announced.

It is also worthy of note that the expected digital tax aimed at online retailers such as Amazon was not introduced. This is likely to be introduced in the future as pressure to fill the tax void vacated by retailers increases.

We await the detail of some of these changes to determine how they will affect companies, individuals, and other businesses in practice.

If you would like to find out more about the key announcements in the Autumn budget, please contact Derek Gemmell or your usual AAB contact.