Published: October 8th, 2021 in Budget/Finance News, Latest News
This year’s Autumn Budget will be delivered on October 27 alongside a Spending Review, the Chancellor confirmed earlier this month.
This will also be Rishi Sunak’s third Budget as Chancellor after taking over from Sajid Javid in February 2020. What we already know is that 2022/23 will be a year for the most significant tax rises in many decades, as a raft of tax changes that intend to raise £12bn a year for social care kick in from next April.
In an unusual move, the government recently announced a series of measures around tax, national insurance, dividends and healthcare more than a month in advance of the Budget. This was seen as a surprise to many as personal taxation rises, or cuts, are the centrepiece of any Budget.
That’s not to say we can rule out further big changes to personal tax rates. The Treasury will be keen to rebalance the nation’s books following the considerable cost of the furlough scheme and other pandemic measures.
Low tax receipts and high expenditure meant the government borrowed £325.1bn in the financial year ending March 2021. That’s equivalent to 15.5% of the UK’s gross domestic product (GDP), the highest such ratio since the end of World War Two.
Expectations ahead of the Budget
In the March 2021 Budget, the Chancellor announced that several tax thresholds will be frozen until 2026 to help fix public finances in the wake of the coronavirus crisis. These include the capital gains tax (CGT) allowance – the amount of profit you can make when selling certain assets before, you need to pay tax.
But there is speculation that further changes to CGT rules are about to be made. Sunak ordered an urgent review from the Office of Tax Simplification (OTS) in July 2020. Proposals produced by the OTS included aligning CGT more closely with income tax rates and reducing the CGT allowance from £12,300 to between £2,000 and £4,000. The Autumn Budget could be the moment that the Chancellor confirms whether any of these proposals will be adopted.
Two weeks ago, the Treasury published draft legislation and guidance for consultation on a proposed new “residential property developer tax, to be charged on profits of companies carrying out residential property development”. The proposed new residential property developer tax (“RPDT”) would be charged on the profits of companies that undertake the UK residential property development activities and is intended to apply for accounting periods ending on or after April 1, 2022 (with an apportionment for accounting periods which straddle this date). The tax would apply to profits above a determined annual allowance.
The consultation ends on October 15, 2021, with the aim that draft legislation will be included in the 2022 Finance Bill. It’s also expected that the final design of the tax, including the rate of the tax, will be announced at the Autumn Budget.
Reports claim one policy change on the table is cutting the minimum salary at which repayments of student loans kick in from £27,000 to £23,000.
It’s also unlikely we will see any significant changes to pensions as Sunak has already risked the wrath of pensioners by temporarily ditching the “triple lock’ for a double lock, in response to a sharp spike in wages.