Following on from yesterday’s budget, Integrity365 Chartered Financial Planner, Nick Booker FPFS, highlights below the notable key announcements to be aware of.
The Autumn Budget and Spending Review 2021 was delivered to a full House of Commons at 12:30pm on 27 October 2021, in stark contrast to the quiet chamber that greeted the Chancellor of the Exchequer for his Spring Budget earlier in the year. That budget was of course focused on “protecting jobs and livelihoods” as the spectre of COVID-19 still loomed large, whereas this was more a budget for the “post-COVID” era. A budget focused on building back better, creating an economy “fit for a new age of optimism”.
The chancellor’s surprise message was that the impact of COVID had not been as bad as had been feared, with revised Office for Budget Responsibility forecasts showing that the economy was in far better shape than had been anticipated. Fewer jobs had been lost and the economy not as badly scarred, with borrowing requirements much lower than expected. Although he warned that there would be challenging times ahead, given the backdrop of high levels of inflation (the OBR expecting CPI to average 4% over the next year), he said that the strong economy provided the opportunity for the government to spend and invest.
Cost of living concerns were addressed, with the Universal Credit taper rate reducing from 63% to 58% and the planned fuel duty rise being cancelled. The chancellor claimed that these changes were designed to help working, low-income families, and in this vein in the run up to the budget, he had also announced an increase to the National Living Wage to £9.50 per hour to take effect from 1 April 2022. The alcohol duty regime was also simplified, with rates on many lower alcohol drinks being reduced and the planned increase being scrapped.
To help those businesses most affected by COVID recover, he announced that a new 50% discount on business rates would apply in the retail, hospitality and leisure sectors for 1 year until 2023. He also confirmed that an online sales tax was being considered, with the plan being that any revenue raised would be used to reduce business rates for bricks and mortar retailers, and that a wider reform of the business rates might come down the line.
There are also giveaways for all government departments, with an overall increase in spending of £150bn over the course of this parliament. £5.9bn is going to the NHS to help tackle backlogs and a further £2.2bn to the courts, prisons and probations service with the aim being to clear the courts backlog. A ‘levelling up fund’ is to be created with disadvantaged communities to benefit from grants and investments, with large amounts being made available to improve transport networks in the West Midlands, Greater Manchester and South Yorkshire. Schools will also receive extra funding and a UK-wide numeracy program will be set up to improve basic maths skills in adults.
Despite the additional spending commitments, the government hasn’t increased income tax rates and has refrained from a highly anticipated review of capital gains tax. However, it should be remembered that in the March 2021 budget, many allowances and thresholds were frozen until 2026. Given high levels of inflation these are stealth tax rises. The temporary National Insurance increase of 1.25% for 2022/23 announced prior to the budget was confirmed and this will become a separate Health and Social Care Levy in 2023. The state pension triple lock has been suspended due to the distorted increase in average wages, but it will increase by 3.1% in in April 2022.
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