Autumn Budget 2021: the devil’s in the detail

by | Nov 12, 2021

London Accountants Arram Berlyn Gardner have been advising businesses and private clients on all areas of accounting and tax planning  for more than 55 years.  In this blog post we take a look at the Autumn Budget statement and consider whether the announcements made by the Chancellor look as good today as the day they were announced!

Chancellor Rishi Sunak’s Autumn Budget took most people by surprise in that a raft of spending pledges were announced, instead of raising taxes to claw back the UK’s COVID-19 debt.

There were plenty of crowd-pleasing measures in Chancellor Rishi Sunak’s second fiscal speech of 2021, ranging from doubling the deadline to report and pay capital gains tax after selling a residential property in the UK from 30 days to 60 days to cheaper pints of beer and cider.

But with the Chancellor continuing to splash the cash while interest rates remain at record lows, other taxpayers will have to pick up the bill for these generous announcements.

Now the dust has settled on last week’s speech, and having been through the documents which accompany a Budget speech with a fine tooth comb, we can shed some light on who can expect to pay the tab.

National living wage & auto-enrolment

The Chancellor played a blinder by announcing an inflation-busting 6.6% increase to the national living wage for over-23s to £9.50 an hour from 1 April 2022, but employers won’t be too happy.

Not only will employers see their salary costs increase at a time when many businesses are still struggling to recover from the pandemic and Brexit, they face the prospect of having to auto-enrol more workers into workplace pension schemes – and pay at least 3% towards it.

Any employee who earns more than £10,000 a year and is aged between 22 and their state pension age will be auto-enrolled into a workplace pension scheme.

A full-time employee who earns the national living wage would be brought into auto-enrolment in the tenth month of the 2022/23 tax year, driving up employer costs for the Q4 2022 and beyond just the pay rise.

Basis periods

We already knew from September 2021 that reforms to basis periods had been delayed, along with Making Tax Digital for income tax. However, Autumn Budget 2021 contained more detail on the basis-period reforms.

The Government estimates there are around 528,000 sole traders and partnerships with non-tax year basis periods, and they will be specifically affected by the change.

The self-employed currently report profit and loss for the tax year up to an accounting date, and for some sole traders and partners, this can be different to the tax year.

From April 2024, existing basis-period rules will be replaced with what the Treasury considers to be “a much simpler method”, taxing profits arising during the tax year.

Any unincorporated business that doesn’t already run its annual accounts to 31 March or 5 April will have to make the change, at an average cost of £3,219  per business.

Council tax set to spike

While one of the headline-grabbing measures involved business rates in England, the Treasury expects council tax – levied on someone’s home, rather than a business premises – to rise 3% a year over the next three tax years.

The Office for Budget Responsibility (OBR), however, predicts net council tax receipts could continue to increase by 6% by 2026/27  at a time when Sunak said inflation, as measured by the Consumer Prices Index, could hit 4%.

The OBR warns that could go even higher, peaking at close to 5% in 2022 and it could hit the highest rate seen in the UK for three decades, negating any pay rises and pushing the cost of living up even further.

If you would like to confidentially discuss how ABG can assist you with any of the above, email ABG@ABGGROUP.CO.UK, call us on 020 7330 0000.

 

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