Autumn Budget 2021 - What To Expect?

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December 4th 2021
Tax Week 35
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Autumn Budget 2021 - What To Expect?

The Chancellor will deliver a Budget next week on October 27th. We take a look at what could be announced.

Mid-day next Wednesday, October 27th, Chancellor Rishi Sunak will once again deliver an update on the country's financial state of affairs, the spending review and a more in-depth look at the implementation of the health care levy.

A lot of talk on post-pandemic balancing of the UK PLC's books is the backbone of the Budget, looking for savings and efficiencies across departments with small cuts across the board.

The 1.25 percent NIC hike next year and it's replacement with the health care levy the following year should be detailed, as should the corporation tax increases - increasing to 25 percent from 2025 with a small profits rate of 19 percent - and increases to dividend tax rates - which will increase in all bands by 1.25 percent next year.

As announced in the March Budget, personal allowances and tax bands are set to be frozen at current rates all the way until April 2026. This means the £12,570 that is current tax-free on income will remain so for another 4 years (whilst inflation continues, and effectively reduces the allowance year-on-year, a treasury benefit called fiscal drag), as will the £37,700 higher rate limit. NIC bands aligned to these will also freeze.

Capital gains tax has its annual exempt amount frozen at £12,300 but there are rumours that Sunak will look here to a tax grab. He could revert the freeze on the allowance and decrease it, or could simply raise the rate from the current 10 to 20 percent, and 18 to 28 percent.

VAT could be used as a vector to help ease the burden of currently soaring energy bills. Households pay 5 percent VAT on their gas, electric etc, and a cut here would help - though the cost of the cut to the Treasury may be hard for Sunak to swallow.

The inflationary pressure on the Bank of England is sky high at the moment, with the 2 percent BoE target already breached and depending on how you measure it, inflation running at least double that. Raising interest rates could be a prospect at some point and the Chancellor should have factored this into his plans.

There are big changes to tax administration headed for the masses, with HMRC's flagship Making Tax Digital project now ready in their eyes for mass adoption. This isn't mandatory until April 2023, but reforms to the way basis periods for taxes work and the quarterly reporting of tax data would bring forward tax receipts for the Treasury.

The 'triple-lock' on pensions has been removed and only to prevent the state pension increasing more than inflation, due to high wage growth metrics. Sunak will likely keep pension rises in line with inflation but cuts to tax relief on private pensions is always predicted when the treasury needs to raise revenue.

The alcohol duty freeze and VAT cuts for hospitality and tourism businesses came to an end this month, and another extension is unlikely. Expect higher prices for the pint if there is no extension, as businesses pass the increase on to customers.

Student loans were recently rumoured to be seeing a raid, with lowering the student loan repayment threshold considered. Expect more on this to be announced.

As usual we will be following the event live and will update our apps and website to provide tools to help you quickly decipher what any announcements mean for you. See you next Wednesday!

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