Chancellor Rishi Sunak announced the contents of his budget on Wednesday 27th October.
Setting out the government’s tax and spending plans going forwards, here is a summary below:
- OBR figures show the UK’s economic recovery is expected to be quicker than expected, proposing to return to pre-Covid levels by 2022.
- UK growth is expected to be at 6.5% for 2021, 2.1% in 2022 and 1.3% in 2023.
- Unemployment peaked at just 5.2%, below 12% that was previously estimated, reflecting 12m fewer people out of work.
- Budget increases total departmental spending over the Parliament by £150 billion – the largest increase this century.
- Wages are rising – up 3.5% from February 2020.
- Business investment is forecast revised up over next five years.
- Sunak announced a new Charter for Budget Responsibility, ensuring that ‘in normal times’ the state ‘should only borrow to invest in future growth and prosperity’.
- Sunak vows to reduce tax by the end of this Parliament by revealing a Universal Credit Taper – taper rate will be reduced from 63% to 55% – a boost for low-income households worth £2bn. Sunak claims it will save almost 2m families on average an extra £1000 per year.
- Another freeze to fuel duty, due to petrol prices hitting a record high this week – a blow to the UK’s green credentials ahead of the COP26 summit.
- Planned increase in alcohol duty will be cancelled. ‘Draught relief’ introduces a lower rate of duty on draft beer, while the Chancellor has scrapped the ‘irrational duty premium’ of 28% for sparkling wines.
- Retail, hospitality and leisure sectors will be able to benefit from an extra year of business rates relief – they will be able to claim a 50% discount on their bills at up to £110,000, a tax break worth £1.7bn.
- There will be more frequent revaluations for business rates every three years, while there will be a relief on investments in green technologies.
- Flights between airports in England, Wales, Scotland and Northern Ireland will see a lower rate of air passenger duty. But, there will be a new ultra-long haul in air passenger duty, covering flights of over 5,500 miles.
- The £1m annual investment allowance will be extended from the end of the year to March 2023.
- The bank surcharge has been slashed to 3% but the overall corporate tax rate faced by the sector will increase from 27% to 28%.
Investment and Skills:
- £1.4bn will be set aside for a Global Britain Investment Fund to help lure in foreign investment. The British Business Bank’s regional financing programmes will be increased to £1.6bn.
- R&D tax credits are expanding to help encourage investment in cloud computing and data costs. Further action will be taken to ensure investment from the tax break is spent in the UK rather than overseas.
- The treasury is increasing spending on skills by £2.8bn over this Parliament which is a 38% rise. This includes a £560m Multiply programme to improve adults’ basic maths skills.