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Mike Wakeford

This was a budget speech that for tax purposes at least is probably more notable for what was not included in it rather than what it did contain.

It was widely expected that the Chancellor would say something about at least one of three topics on which there has been a lot of recent speculation. Instead there was no mention of reform to capital gains tax, inheritance tax or the taxation of pension funds, not even an intention to launch consultations on possible future changes. Perhaps whilst Covid-19 cases remain high, it was thought inappropriate to announce what would might amount to significant tax increases.

The Chancellor did confirm a lot of things that we already knew about, including increases in National Insurance and the rates of tax on dividends to fund care costs. There will be increases of 1.25% in both employee’s and employer’s national insurance from April 2022, and the same increase to the current rates of tax on dividends. You can find more information on this increase here: National Insurance and Dividend Tax Increases

There was also confirmation of changes to the roll-out of Making Tax Digital. The extension of this to all businesses and landlords with turnover in excess of £10,000 has been deferred from April 2023 to April 2024, with partnerships coming within MTD a year later in April 2025.

HMRC are also delaying the potential introduction to income tax basis periods for unincorporated businesses from April 2023 to April 2024, with the year of transition being 2023/24. This will require profits for tax purposes to be reported for tax years (6 April to 5 April) regardless of what year end a business actually has. Some businesses will face an increased tax liability in the year of the change, and rules will be introduced to spread this over a number of years.

For businesses, the increase in the maximum amount of capital expenditure qualifying each year for 100% annual investment allowance to £1 million will be extended to 31 March 2023. This was due to come to an end on 31 December 2021.

Two reforms were announced to research and development tax credits. In recognition of the way that more research is now being carried out, the relief will now be available on costs related to cloud computing and data collection. From April 2023, the relief will only be available for work that is carried out in the UK.

There are to be further reductions in business rates for some businesses and the whole of this area is going to be subject to review and reform to make them fitting for the modern world.

It was announced there will be no increases in the rates of fuel or alcohol duty, and some significant reforms to alcohol duties were announced, although these will not take effect until 2023. The rates of duty will decrease from 15 to just 6, and the changes will see increases in the rates paid on the highest alcoholic strength drinks and reductions in the lowest strength drinks. There will be an additional 5% reduction in the duty on draught beers and ciders.

There will be some reform to air passenger taxes, with lower rates being charged on purely domestic flights, and a new higher rate band brought in on flights that are more than 5,000 miles long.

Increases in the rates of the National Minimum Wage were set out in advance of the budget, and today a cut in the rate at which Universal Credit is tapered away from 63p in the pound to 55p in the pounds was announced, to take effect no later than 1 December.

For assistance with any changes from the budget, please contact your local Moore adviser.