Rishi Sunak’s Autumn 2021 Spending Review was billed as a Budget for a new age. The Chancellor pledged a lot of “give-aways” but as always seems to be the case, a lot of this related to promises for the future rather than delivering anything now.
The key headlines were:
- The Government has announced some reforms to Research & Development tax credits. They will expand the definition of qualifying expenditure to include data and cloud costs, however, they also expressed concern over innovation generated outside the UK that in their view is being funded by UK tax credits and so the Chancellor wishes to refocus support towards UK innovation. Many thought this was covered off by the PAYE/NIC cap that was introduced in April 2021 but the Government clearly feels this is insufficient. These changes will be introduced with effect from 1 April 2023 and the Government will release further details in due course. Businesses with staff or outsourced services that sit outside the UK will need to watch this carefully.
- It was confirmed that as a first step towards bringing in a Health and Social Care levy, the Government will be increasing National Insurance contributions and tax on dividends by 1.25% from April 2022 for one year. From April 2023, the Health and Social Care levy will come into force. This was announced ahead of the Spending Review.
- Annual Investment Allowance – this was set to drop to £200,000 from 1 January 2022 but will be retained at its current £1 million level until 31 March 2023.
- Following consultation over the summer, the Government will legislate to “simplify” the taxation of self-employed individuals and partners by making everyone be assessed to tax on a tax year basis rather than an accounting period basis – regardless of what accounting period they choose to have.
This will come into force with effect from 6 April 2024 with the 2023/24 tax year being a “transitional year”. This could result in some taxpayers being assessed on up to 23 months profit in a single year.
The Government will be allowing the use of overlap relief and the ability to spread the adjustment over a five year period in some cases but this will definitely result in an acceleration of when tax on profits will be due and will lead to complication – in particular for anyone wishing to retain an accounting period of anything other than accounting period that is co-terminous with the tax year.
- The Government will legislate to temporarily increase the headline rates of relief for the Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR), and Museums and Galleries Exhibition Tax Relief (MGETR) for expenditure taking place from 27 October 2021, returning to current rates by 1 April 2024. Further information is available on request.
- A new Residential Property Developers Tax will be introduced from 1 April 2022. Profits exceeding an annual allowance of £25million will be subject to an additional 4% tax charge. This is therefore only likely to impact large developers.
- The real time CGT reporting deadline has been extended from 30 days to 60 days. This applies to all disposals that complete on or after 27 October 2021.
- The minimum pension age will be increased from 55 to 57 from 6th April 2028.
If you would like any further information on the changes and how they could impact on you then please do not hesitate to contact us.
About the author
Pete Heslington is a Chartered Tax Advisor (CTA) and Trusts and Estates Practitioner (TEP).
Pete’s expertise crosses many sectors and taxes. He focuses on bespoke tax planning and structuring covering corporate tax, mergers and demergers, acquisitions and sales, exit and remuneration planning, share schemes, partnership taxation, investment planning, wills and probate.
