The Autumn Budget 2021 holds a lot of promise and will have a significant impact on businesses. Chancellor Rishi Sunak delivered the Autumn Budget and Spending Review 2021 in October, starting with positives like rising employment and wages, growing investments, and public finances that are stabilising.
Sunak said the Budget delivers a stronger economy for the British people, adding that it will provide stronger growth, stronger public finances, and stronger employment. What this means for businesses and those engaged in business is important, especially since the Autumn Budget 2021 promises to invest in a more innovative and high-skilled economy.
In the Budget speech, Sunak also said it would back businesses, “Because our future cannot be built by government alone but must come from the imagination and drive of our entrepreneurs.”
- 50% Business Rates Discount
Businesses in the retail, hospitality and leisure sectors are looking at a 50% discount on business rates with the Autumn Budget 2021. This will be applicable for a year, Sunak said in his Budget speech.
The discount will cover businesses like pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms and any eligible business can claim a discount of 50% on their bills, up to a maximum of £110,000.
“That is a business tax cut worth almost £1.7bn,” he said.
A tax consultancy would say this is great news for businesses in the retail, hospitality and leisure sectors, as it ties with the Small Business Rates Relief. When combined, the majority of all retail, hospitality and leisure businesses will be eligible for a discount of at least 50%.
“Apart from the Covid reliefs, this is the biggest single-year tax cut to business rates in 30 years,” Sunak said, adding that together, the Autumn Budget 2021 cuts business rates by £7 billion.
- Tax Cuts
Tax cuts were one of the highlights of the Autumn Budget 2021 for business owners, especially as they were described as a simpler, fairer, and more competitive tax system that would unleash the dynamism and creativity of British businesses.
Tonnage Tax reforms have been introduced, making it easier for shipping companies to join the regime and ensure they are not disadvantaged in comparison to firms operating in other countries. Tax consultants would also argue that the reforms reduce unnecessary administrative burdens and boost the use of the UK flag.
The amendments made to Tonnage Tax will be effective from 1 April 2022 and businesses that have elected into the Tonnage Tax regime will be affected by these reforms. While there are several proposed provisions, a tax consultancy will be able to help affected businesses gain a better understanding of these tax reforms.
- Creative Industries
An area that was focused on during the Autumn Budget 2021 speech was creative industries. “Levelling up is also about protecting our unique culture and heritage. The British Museum; Tate Liverpool; the York Railway Museum, we’re investing £850m to protect museums, galleries, libraries, and local culture,” Chancellor Sunak said.
Over 100 regional museums and libraries will be renovated, restored and revived and £2 million has been secured to start work on a new Beatles attraction on the Liverpool waterfront.
“We’re also going to review our museum freedoms. And make our creative tax reliefs more generous,” he said, adding that, on current plans, the tax relief for museums and galleries is due to end in March next year. That is, just as exhibitions begin to tour again.
The tax relief will thus be extended for a further two years, until March 2024.
In addition to this, tax reliefs for theatres, orchestras, museums and galleries introduced to recover from COVID-19 until April 2023 will be doubled until April 2024.
“That’s a tax relief for culture worth almost quarter of a billion pounds,” Sunak said.
- Fuel Duty
The planned rise in fuel duty was cancelled, as fuel prices were at the highest level in eight years when the Autumn Budget 2021 speech was made. Sunak explained that he was not prepared to add to the squeeze on families and small businesses, which was the reasoning behind the cancellation of the planned rise in fuel duty.
“That’s a saving over the next five years of nearly £8 billion,” he said.
- Alcohol Duties
In the Autumn Budget 2021 speech, Chancellor Sunak described the British alcohol duty system as outdated, complex and full of historical anomalies. “Today, we are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years,” he said, introducing five steps that will create a simpler, fairer and healthier system.
The first step brings down the number of main duty rates from 15 to six, with a ‘common-sense principle’ of, “the stronger the drink, the higher the rate.”
As such, alcoholic drinks like stronger red wines, fortified wines and high-strength white ciders will see a small increase in rates as they are currently under-taxed given their strength. This, Sunak believes, will end the era of cheap, high-strength drinks that can harm public health and enable problem drinking.
On the other hand, rates of rosé, fruit ciders, liqueurs, and lower strength beers and wines will drop with these measures, as many lower alcoholic drinks are currently overtaxed.
If you are a small, innovative craft producer, Small Producer Relief announced by Sunak will be of interest to you. Tax consultants would explain that this will bring small cider-makers and other producers making alcoholic drinks of less than 8.5% ABV relief as they will now be included in the principle of Small Brewers Relief.
The third step under the proposed changes to alcohol duties ends the 28% duty premium on sparkling wine.
“Sparkling wines – wherever they are produced – will now pay the same duty as still wines of equivalent strength,” he said, explaining that English and Welsh wines will now pay less than stronger imported wines.
Duty has also been cut on fruit cider.
“The fourth step I’m taking today will directly support the home of British community life for centuries: our pubs,” Sunak said, explaining that pubs were struggling even before the pandemic, with consumption dropping by 40% between 2000 and 2019.
He said: And many public health bodies recognise that pubs are often safer drinking environments than being at home.
As such, the Draught Relief is being introduced, which will apply a new, lower rate of duty on draught beer and cider that is served from draught containers over 40 litres.
“It will particularly benefit community pubs who do 75% of their trade on draught,” Sunak said, adding that Draught Relief will cut duty by 5%.
“That is the biggest cut to cider duty since 1923,” he added.
Pub-owners will be happier to know that this is not a temporary measure, as it is a long-term investment of £100m a year in British pubs.
However, pub-owners will have time to understand the exact reforms coming into place with the help of their tax consultants as these reforms will only come into place in February 2023.
Those in the hospitality industry, however, saw an immediate cancellation of the planned duty increase on spirits like Scotch Whisky, wine, cider and beer. This was a tax cut worth £3 billion.
- Universal Credit Taper
Universal Credit is a payment to help people with their living costs and the Universal Credit Taper withdraws support the more hours one works. The tax on work is high, with 63% at the time of the Autumn Budget 2021 speech.
“So, to make sure work pays, and help some of the lowest income families in the country keep more of their hard-earned money, I have decided to cut this Rate, not by 1%, not by 2% – but by 8%,” Chancellor Sunak said.
The new tax on working people will thus be 55%.
As any tax consultancy would explain, this is important to business owners as it will have a direct impact on their employees. It supports working families, helps with the cost of living, and rewards work. In addition to the Universal Credit Taper, the Autumn Budget 2021 will also increase Work Allowances by £500, which results in a tax cut of over £2 billion next year.
“Nearly 2 million families will keep, on average, an extra £1,000 a year. Changes like this normally take effect at the start of the new tax year in April. But we want to help people right now,” Sunak said.
At the time of the Budget speech, the changes were to be made before 1 December.
- Innovation
The Budget also invested in innovation, which tax consultants would agree is much needed for economic growth. “I can confirm we will maintain our target to increase R&D investment to £22bn. But in order to get there, and deliver on our other priorities, we’ll reach the target in 2026-27 spending, by the end of this Parliament, £20bn a year on R&D,” Sunak said.
This is a cash increase of 50% and the fastest increase ever.
He said: Combined with those tax reliefs, total public investment in R&D is increasing from 0.7% of GDP in 2018 to 1.1% of GDP by the end of the Parliament.
He added that the Net Zero strategy will invest £30 billion to create new, green industries of the future. “We’ve just issued our second Green Bond, making us the third-largest issuer of sovereign green bonds anywhere in the world,” Sunak explained.
Simply put, the Autumn Budget 2021 introduced many relief programmes for businesses and the measures that will come into effect in the coming months will have a significant impact on businesses across industries.
The Autumn Budget 2021 cut fuel duty, air passenger duty, and alcohol duty, gave room for growth by increasing employment and wages, and improved public finances. There is also more investment in infrastructure, innovation and skills and the Budget paves the way for a higher-wage, higher-skill and higher-productivity economy.
While this will benefit the country in general, it will also be of great significance to businesses. Any tax consultancy would advise a business owner to closely study these reforms and ensure they benefit from them.
