Autumn Budget 2021 – Just The Highlights

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.