As is now the norm, we already knew through pre-Budget briefings that the public sector pay freeze was to be lifted, more funding was to be provided to the NHS and the National Minimum Wage was to rise to £9.50 per hour.
When added to the National Insurance rises from April 2022 which were announced back in September, what else could Chancellor Rishi Sunak include in this, his second Budget of the year? The answer was quite a lot or perhaps a “bit for everyone” would be more accurate.
The Chancellor set the scene by explaining the current pressures on the economy with references to supply chain problems and rapidly rising energy prices as a result of the world’s economies restarting.
The headlines will probably be captured by the plans to overhaul the Alcohol Duty system from 2023 (under which the overriding principle will be that the stronger the drink the more the duty), and the reduction in the Universal Credit taper to help the lower paid by reducing the effective rate by allowing claimants to retain an extra 8p of every £1 net income they earn.
Forming part of the Government’s ‘Levelling Up’ agenda Chancellor Rishi Sunak explained the planned investment in infrastructure, investment in innovation, technology and skills.
The Budget contained plans for investment in a new ‘stronger’ and greener economy but, unsurprisingly, little in the way of significant tax changes affecting the average taxpayer.
What we did hear about were certain tax changes which the Chancellor said were only possible following Brexit and which included:
- Tonnage tax paid by ship owners encouraging more registrations under the UK flag
- Revision of the Research & Development Tax Relief to ensure it is more effectively targeted for UK-based businesses and increasing the scope of the relief and grants to cover cloud and data developments
- A cut in Air Passenger Duty for internal UK flights and changes to the distance bands for international travel with environmental considerations in mind
- Changes to cross border business tax loss relief to protect the Exchequer from unfair outcomes
Positive news was provided by the Chancellor in his announcement that duty rates on fuel, wines and spirits etc would not be increased.
High Street business received a boost with the outcome of a Government review and overhaul of the business rates system. This included a pledge for a 3 -year revaluation, a new temporary business rate relief of 50% for eligible retail, hospitality and leisure properties and a new 100% improvement relief for 12 months.
With every Budget there are winners and losers.
- Losers in this Budget were companies and groups deriving profits from residential development with a new 4% tax on profits over £25m to help pay for building remediation (targeting the cladding problem).
- Whilst motorists can expect an RPI-linked increase in Vehicle Excise Duty, the HGV duty increase is frozen, and the levy suspended to help the haulage industry.
- From April 2022, van benefit-in-kind charges and the car and van fuel benefits will increase in line with CPI.
- For smokers, tobacco duties will rise at RPI +2% and hand-rolling tobacco by RPI +6% with immediate effect.
- HMRC will be allowing small sole traders and landlords another year in which to prepare for Making Tax Digital – delayed until April 2024.
- For those reporting Capital Gains Tax on the sale of residential property, the payment window increases from 30 days to 60 days ensuring sufficient time is given to report and pay the tax.
- As part of its clamping down on tax avoidance, HMRC will be given the power to take strong financial and deterrent action against those who promote tax avoidance schemes.
All Budgets and Financial Statements are accompanied by numerous background papers from HM Treasury and HMRC. PayStream will be scrutinising them in detail and will ensure that you are kept up to date with anything which may affect our customers.
