On 27th October, Rishi Sunak announced the Autumn Budget 2021.
Due to the scale of the economic damage, whilst Sunak acknowledged that the pandemic isn’t over, he said the Autumn Budget would be a starting point for a post-Covid ‘age of optimism’.
He made major announcements on corporation tax, alcohol tax, minimum wage & airline passenger duty (APD). The big question is, what does it all mean for you?
Below, we take a closer look at the key announcements made in the Autumn Budget.
- Property Tax
- Corporation Tax
- Dividend Tax Rates
- Alcohol Tax
- Minimum Wage increases
- Air Passenger Duty
- Fuel Duty
- Universal Credit Payments
Retail stores will pay less in property tax in a shake-up to business rates. Businesses in the retail, hospitality and leisure sectors will see a 50% rates cut for the next year up to a maximum of £110,000. The taxes charged on commercial properties could see shops passing savings onto customers. It’s not guaranteed, but some firms may reduce prices as a result.
The main rate of corporation tax will remain at 19% until April 2023. From this date the main rate will increase to 25%, with a Small Profits Rate of 19% for profits not exceeding £50,000.
There will be marginal relief for profits between £50,000 and £250,000 (these thresholds are proportionately reduced for the number of associated companies and short periods). Close investment holding companies, including most family investment companies, will not qualify for the 19% rate.
Dividend Tax Rates
From 6 April 2022, the dividend tax rates will also be increased by 1.25%. The basic rate dividend tax will increase to 8.75%, the higher rate dividend tax will increase to 33.75% and the additional rate dividend tax will increase to 39.35%. No increases or changes to the main or savings income tax rates.
Sunak announced an overhaul of alcohol tax, where drinks will be taxed based on their strength, not their category. This means stronger drinks like high-strength ciders and fortified wine will be more expensive, but some lower alcohol drinks will become cheaper. Tax on sparkling wine will be reduced to bring it in line with still wine. And duty rates on draught beer and cider will be cut by 5% in an effort to support pubs. Sunak said that this would see the cost of a pint reduced by an average of 3p. These changes will come into effect until February 2023.
Minimum Wage Increase
The ‘National Living Wage’ for workers aged 23 and over will increase from £8.91 to £9.50 per hour. Minimum wages for other age ranges will increase as follows:
21 to 22 year olds: from £8.36 to £9.18 per hour
18 to 20 year olds: from £6.56 to £6.83 per hour
16 to 17 year olds: from £4.62 to £4.81 per hour
Apprentices: from £4.30 to £4.81 per hour.
What is interesting is that the National Living Wage will then be in line with the Living Wage Foundation’s real Living Wage of £9.50. This is calculated based on the cost of living, and employers can choose to pay it if they wish.
Minimum wages for those aged under 23 however, still won’t match, and none of the new bands will match the ‘London rate’ of £10.85.
Air Passenger Duty
Domestic flights will cost less, whilst Long-haul flights will be more expensive from April 2023, as a new ‘ultra-long-haul’ band of air passenger duty (APD) is introduced.
Whilst domestic UK flights will get cheaper when a 50% APD cut is implemented that same month. The new ultra-long-haul rate was framed as an environmentally friendly measure.
A planned fuel duty rise has been cancelled amidst a backdrop of supply issues and fuel prices reaching record highs – just days after petrol prices hit a record high of 142.94p per litre. Interestingly this will be the 12th consecutive year the government has frozen these rates.
The freeze means tax on petrol and diesel will remain at 57.95p per litre until at least 2023. According to the government, since the freeze began, the average driver will have saved £1,900 in tax compared with the pre-2010 duty system.
Universal Credit Payments
Changes will see millions of households keeping more of their benefits. The government has cut the rate at which you lose benefits for each £1 you earn above £515 a month – from 63p to 55p. While changes to Universal Credit would usually take place in the next tax year, the Chancellor said this taper cut would happen ‘within weeks’, and/or by 1 December 2021. Sunak said this means a single mother of two, renting and working full-time for the National Living Wage, would be £1,200 a year better off. This announcement comes after the government controversially cut £20 a week from Universal Credit when it ended a temporary uplift at the start of October against warnings this would plunge many into poverty.
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