Rishi Sunak delivered his third budget as chancellor to the Commons on Wednesday 27 October 2021 where he announced a series of measures for business across reforms, rates and incentives, while also reducing the Universal Credit taper.
Investing in growth and supporting businesses
Business rates reform
The publication of a long-awaited review of business rates brought with it a series of measures to adjust the system.
This included a 50% cut to rates for eligible retail, hospitality and leisure businesses in 2022 to 2023, but to a cap of £110,000.
Additionally, the rates multiplier will be frozen for 2022 to 2023, which the Treasury says will save businesses in England £4.6 billion over the next five years.
Other reforms included the introduction of a new investment relief for green technology, an improvement relief for businesses expanding their properties, and a move to three - yearly revaluations from 2023, instead of five years as it stands now.
Taken together, Chancellor Rishi Sunak said the measures announced in the budget amounted to a £7 billion cut to business rates.
Tax relief in the Arts sector
the headline rates of tax relief will be temporarily increased for theatres, museums, orchestras and galleries across the UK from 27 October 2021 to 31 March 2024., increasing the relief organisations can claim as they invest in new productions and exhibitions.
Annual investment allowance extended
The annual investment allowance will remain at its current level of £1 million until 31 March 2023, instead of ending on 31 December 2021 as planned.
The allowance, which allows companies to deduct qualifying capital allowances from their profits before tax, previously stood at 200,000 pounds but was raised from 1 January 2019 onwards to encourage investment.
R & D Tax credit changes
The Chancellor also announced plans to reform R & D tax release, by including data and cloud costs as qualifying expenditure, as well as refocusing the release on activity in the UK.
Details on these changes have not yet been released, but the government says these will form part of its ‘further tax administration and maintenance announcements’ later in the autumn.
National Living Wage
From 1 April 2022, the National Living Wage will increase by 6.6% to £9.50 an hour. Young people and apprentices will also see pay increases as the National Minimum Wage rates will also increase next April.
on average, people earning minimum wage can expect to see an extra £1.074 a year before tax. The freeze on public sector pay will also end on 1 April next year, paving the way for around 5.7 million people to get a pay rise.
The Chancellor said public sector workers, like nurses, teachers and police officers, will see “fair and affordable pay rises” across the whole Spending Review period - Within the next year.
The decision on how much extra money public sector workers will get is not due to be made until next year, once the pay review bodies have made their recommendations.
Universal Credit taper cut
People working and claiming Universal Credit will soon take home more money, after the chancellor announced the taper rate will be reduced from 63% to 55%.
Mr Sunak said “The Universal Credit taper withdraw support as people work more hours. The rate is currently 63% so for every extra pound someone earns, their Universal Credit is reduced by 63 pence.”
“Let us be in no doubt: this is a tax on work - and a high rate of tax at that.”
It will be welcome news after the £20 per week Universal Credit uplift introduced during the pandemic was removed - a move which received great backlash.
The taper change will come into effect by 1 December.
Additional investment of £170 million in 2024 – 25 to increase the hourly rate to be paid to early years eat providers to deliver the Governments free childcare hours;
New investment of £302 million to fund new programmes to support parents, provide bespoke breastfeeding services and parent - infant mental support, and funding to roll out Family Hubs across England;
£639 million resource funding per annum by 2024 – 25 as part of the Government's commitment to end rough sleeping in England, an 85% cash increase compared to 2019 – 20. This brings total funding to £1.9 billion resource and £109 million capital investment over the Spending Review 2021 period, and builds on the governments achievement of having reduced rough sleeping numbers by a third between 2019 and 2020.
Funding for programmes, skills and apprenticeships
An increase in adult schools funding by 29% in real terms compared to 2019 – 20 - this funding will go towards a range of policies in England such as continue in the Prime Minister’s Lifetime Skills Guarantee to offer free Level 3 courses for adults, and quadruple the current scale of Skills Bootcamps;
£560 million Of new funding through the UK Shared Prosperity Fund for the new UK – wide Multiply programme Which will support up to half a million adults to improve their numeracy;
New investment of £1.6 billion for 16 – 19-year olds’ education in England. This will maintain funding in the face of demographic growth and provide additional hours for learners who take T Levels;
Increases apprenticeship funding in England to £2.7 billion for 2024 – 25 and continue to invest over £900 million for each year of this Spending Review across Great Britain on work coaches to ensure Universal Credit claimants receive the best support to find employment;
Confirmed funding for the restart scheme in England and Wales, to continue providing intensive and tailored support to long term unemployed people to help them find work;
£90 million to extend the Job Entry Targeted Support Scheme to the end of September 2022 - helping those unemployed for between three and 12 months across Great Britain find work.
Duties and rates
Fuel duty rates will be frozen UK lead for the 12th consecutive year.
Alcohol duty will be frozen across the board for the third year running saving consumers £3 billion.
The new Health and Social Care Levy, along with an increase to the rates of dividend tax, will raise about £13 billion per year for spending on health and social care across the UK. This enables significant further funding for the NHS, for the Governments reforms to social care, public health and prevention programmes, an investment in training the workforce of the future.
£2.3 billion in the next years will try overhangs form diagnostic services with at least 100 community diagnostic centres across England - helping millions of patients access earlier diagnostic tests closer to home;
£2.1 billion over the next three years to support innovative use of digital technology so hospitals and other care organisations are as connected and efficient as possible, freeing up valuable NHS staff time and ensuring the best care for patients wherever they are;
£1.5 billion over the next three years for new surgical hubs, increase bed capacity and equipment to help elective services recover, including surgeries and other medical procedures.
The Budget confirmed an additional £4.7 billion by 2024 – 25 for the core schools budget in England, over and above the Spending Review 2019 settlement for schools in 2022 – 23, as well as £2.6 billion of capital funding for new school places for children with special educational needs and disabilities, and £1.8 billion of additional money for education recovery - in addition to the £1.4 billion announced in June 2021.
Investment of £11.5 billion will also be made available in the Affordable Homes Programme in England from 2021 – 26 to help build up to 180,000 new affordable homes - with 65% of funding for homes outside London.
Shipping, tonnage & seizing the opportunities of Brexit
The Government announced plans to modernise the UK's Tonnage Tax regime to ensure that the shipping industry remains highly competitive in the global market.
The first Freeport tax sites will be in Humber, Teesside and Thames, and those Freeport's will be able to begin initial operations from November.
A new UK Global Talent Network will work with businesses and research institutes to identify and attract the best global talent in key science and tech sectors.
The new £1.4 billion Global Britain Investment Fund Will ensure that economic opportunities are spread more evenly across the UK by supporting investment in the UK's life sciences, offshore wind and automotive manufacturing sectors.
A fund of £11 billion of Overseas Development Assistance (ODA) Was announced, including doubling the UK's international climate finance to £11.6 billion between 2021 – 22 and 2025 – 26 and £430 million to the Global Partnership for Education to help to educate young people, particularly for girls (the UK Government’s largest ever contribution).
Furthermore, £703 million will be committed over the next three years to improve the safety, security and efficiency of the UK Border.
Sunak Also confirmed eligibility criteria for the new Scale-Up Visa, to help make it quicker and easier for fast growing businesses to bring in highly skilled individuals.
Meanwhile, a 50% cut in Air Passenger Duty for flights between airports in England, Scotland, Wales and Northern Ireland was announced - which is set to benefit around 9,000,000 passengers in 2023 – 24 and will be delivered via a new domestic band.
A new rate of Air Passenger Duty of £91 will also come into play on flights of 5500 miles or more. These reforms apply across the UK except for the direct long haul rates for Northern Ireland which are devolved.
the alcohol duty system will be overhauled to make it fairer and more straight forward, with drinks taxed in proportion to the alcohol content and duty rules simplified.