On Wednesday, 27th October 2021, the Chancellor, Rishi Sunak, delivered his third Budget as the economy is still recovering from the pandemic. He announced he will increase total departmental spending by £150bn over the course of this parliament.
While updates to the associated Treasury Direction and HMRC’s Guidance are awaited, the key updates are as follows:
Economy and public finances
- Inflation was at 3.1% in September and likely to rise to an average of 4% over the next year
- UK economy forecast to return to pre-COVID levels by 2022
- Economy forecast to rebound in 2021, with predicted annual growth of 4% this year
- Unemployment expected to peak at 6.5% next year, lower than the previously predicted 11.9%
- Borrowing as a percentage of GDP is forecast to fall from 7.9% this year to 3.3% next year
- Borrowing will then fall as a percentage of GDP in the following four years to 1.5%
Minimum Wage
- The National Living Wage will rise from £8.91 to £9.50 an hour from April 2022. This means ‘fair pay rises’ for 2 million people
Universal Credit
- Universal Credit taper rate to be reduced from 63p to 55p. This will be worth more than £2bn. The work allowance will be increased by £500. This will be implemented no later than 1 December 2021
- Universal Credit claimants will keep more of their earnings
Public Sector
- Public sector pay freeze to end
Businesses
- 50% business rates discount for retail, hospitality, and leisure sectors, up to a maximum of £110,000
- Business rates will be reformed to support companies, including a 12-month relief for companies to invest in their premises
- Business Taxes – the bank surcharge will be cut from 8% to 3%
- Tax relief for business R&D to be focused on UK activity
Pensions and Investments
- The government has confirmed it will consult on further changes to the regulatory charge cap for pension schemes to unlock institutional investment to drive innovation
- Pensions Lifetime Allowance – The government will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.
- Starting rate for savings tax band – The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2021-22.
- Individual Savings Account (ISA) annual subscription limit – The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.
- Junior ISA and Child Trust Fund annual subscription limit – The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.
Foreign Aid
- Spending 0.7% GDP on foreign aid to return by 2025
Air Travel
- Flights between airports in the UK will be subject to a new lower rate of Air Passenger Duty from April 2023
- A new ultra-long-haul band in Air Passenger Duty for flights over 5,500 miles will be introduced from April 2023
- Financial support for English airports to be extended for a further six months
Education
- Schools to get an extra £4.7bn by 2024-25
- New £560m UK-wide numeracy programme will be set up to help improve basic maths skills among adults
- Almost £2bn of new funding to help schools and colleges recover from the pandemic
- £300m to be spent on a “Start a Life” parenting programme, with an additional £170m by 2024-25 promised for childcare
The Arts
- Tax relief for the Arts sector doubled to 2023
- Tax relief for museums and galleries will be extended to March 2024
Research and Development and Science
- £22bn R&D Investment by 2026-27
- Core science funding will rise to £5.9bn per year by 2024-25
Alcohol, Tobacco and Fuel
- Alcohol duty rates streamlined – the number of rates will drop from 15 to six
- New lower ‘draught relief’ for pubs
- Stronger red wines, fortified wines, and high-strength ciders will see a small increase in their rates
- Rates on many lower alcohol drinks including rose wine, fruit ciders, liqueurs, lower strength beers and wines will fall
- A new lower duty on draught beer and cider will cut the rates by 5%
- Duty on pub pints cut by three pence
- Ending of the 28% duty premium on sparkling wine. All sparkling wines to have the same duty as still wines of equivalent strength
- No fuel duty rise
- No tobacco duty rise
Transport, infrastructure
- £5.7bn for transport schemes in England
- HGV levy has been suspended for a further year until the end of 2023, as well as freezing the Vehicle Excise Duty for heavy goods vehicles
Housing
- £24bn is earmarked for housing: £11.5bn for up to 180,000 affordable homes, with brownfield sites targeted for development
- A 4% levy will be placed on property developers with profits over £25m rate to help create a £5bn fund to remove unsafe cladding
Courts, Prisons and Probation Services
- There will be an extra £2.2bn for courts, prisons, and probation services
- £3.8bn earmarked for prison building programme
Please get in touch if you have any questions about what the Budget means for you or your financial plans.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
