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Get thee to the Pub! Our summary of Sunak's Boozy Budget statement.

Get thee to the Pub! Our summary of Sunak's Boozy Budget statement.

Author: Paul Langan

This year's Budget Statement, much like last years, held no real surprise. However, some decisions around fuel and air travel duties will disappoint those wanting more drastic moves on reducing carbon emissions. Most announcements were drip fed to the media ahead of time by Sunak and his band of merry MP's. MP's who were all the merrier following the slightly surreal lesson on the different alcohol percentages of British beverages such as Fruit Ciders, Sparkling Wine and Rosé, given in this Budget Statement. This was all part of the Chancellor's post-Brexit "The stronger the drink, the higher the rate (of duty)" plan, for alcohol duty reform. Before we run off to check the proof on our favourite tipple, lets have a look at the measures announced and confirmed in today's Budget.

Universal Credit Taper Change

Perhaps one of the worst kept secrets of today's budget was the much expected reduction to the Universal Credit Taper rate. Sunak did however, catch most pundits off guard by how much he reduced it by. The Taper Rate, which is 63% at the moment, will drop to 55%. This 8% drop was a greater reduction than expected and will be welcomed by those on Universal Credit, who are working. What this change means is that for every £1 you earn, while on Universal Credit, your wage will be docked by 55p per £1 instead of 63p per £1 - an 8p per pound saving.

Also, work allowances for households with children or a limited capacity for work, will rise by £500 a year.

These changes to Universal Credit will be in place by this coming Dec 1st. 

National Living Wage Increase

The National Living Wage will increase to £9.50 per hour from April 2022. For those aged 21-22 it will increase to £9.18 an hour, while the apprentice rate will increase to £4.81 an hour.

Changes in Universal Credit, added to the increase in the National Living wage mean a marked improvment for those working and in receipt of Universal Credit. Of course this does nothing to help those in receipt of Universal Credit, who are unable to work.

Personal Tax Changes

No surprises here today. Rishi Sunak had broken the Conservative's campaign promise of no increases to VAT/Income Tax/ NIC's, by announcing an increase in NIC's long before the budget.

  • Rise in the National Insurance Contribution by 1.25% from April 2022, for all earning over £9,568. This was old news and barely got a mention in today's statement. This increase will apply to all employees and employers liable for Class 1 NIC's. It also applies to those self-employed, liable for Class 4 NIC's.
  • From April 2023, the higher NICs rate will apply to people working beyond the state pension age. 
  • The other tax increase that had been previously announced was an increase in Dividend tax, which will rise by 1.25% across all bands, from April 2022. This tax is payable on dividend earnings of above £2,000 per year.
  • As announced last year, the personal allowance and higher rate threshold are frozen until 2026. This means the Personal Allowance of £12,570, basic rate limit at £37,700 and higher rate threshold of £50,270, introduced for the 2021/22 tax year, will all remain unchanged until the 2025/26 tax year.
  • No changes to Pension, Savings, IHT, CGT allowances.

The expected post COVID pinching of purses and increased taxation, in areas like Self-employed taxation and CGT, that were hinted at in last year's budget, did not materialise.

End to the Public Sector Pay Freeze

Millions of Public Sector Workers across education, health and defence sectors, will receive a pay rise next year. Whether that pay rise is to be greater than the rate of inflation, is a different matter. Inflation is set to average 4 per cent over the next year, according to the Office for Budget Responsibility’s forecasts.

Businesses

  • A new 50% business rates discount will apply to retail, hospitality, and leisure sectors, on bills of up to a maximum of £110,000
  • The £1 million Annual Investment Allowance (AIA) limit is extended to 31 March 2023.
  • We already knew that there was a 6 month extension to the Covid Recovery Loan Scheme.
  • The government will invest £20bn in R&D by 2024-25.
  • Tax relief for businesses who invest in R&D will be limited so that it only applies to domestic activities.
  • The scope of the R&D tax relief is to be expanded to include cloud computing and data costs.
  • Next year’s planned increase in the business rates multiplier will be cancelled.
  • Business rates will be reformed to support companies, including a new 12-month relief for firms who invest in their premises. This 100% improvement relief for business rates will apply, where businesses increase the rateable value of a premises, through eligible improvments. This will take effect in 2023 and be reviewed in 2028. 
  • The bank surcharge on profits over 25 million pounds, will be cut from 8% to 3%.. This softens the impact of the Corporation Tax rise.

Alcohol, Fuel, Other Duties and Taxes

  • Alcohol duties have been frozen. In 2023, the system is being “radically” simplified by introducing a new system based on the idea that “the stronger the drink, the higher the rate”. This will mean a reduction in taxes on English Sparkling Wine, Rosé and Fruit Ciders, for example.
  • The local pubs are to get a boost from February 2023. A new “draught relief” will apply a lower rate of duty on Draught Beer and Cider, cutting the tax by 5 per cent on drinks served from draught containers over 40 litres and bringing the price of a pint down by 3p.
  • A planned increase in fuel duty has been cancelled due to the high price of fuel at present.
  • Internal flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty from April 2023. This move has angered many environmental campaigners.
  • A new third band of Air Passenger Duty for ultra-long haul flights over 5,500 miles will be introduced from April 2023.
  • Duty rates on all tobacco products will increase by RPI inflation plus 2% and on hand-rolling tobacco by RPI plus 6%. This change will take place from today.
  • Tonnage tax changes announced. In an effort to attract more shipping companies to base their headquarters in the UK, the Chancellor announced that shipping firms that fly the red ensign flag (the UK’s historic merchant shipping flag) will be offered tax breaks

Property

  • £11.5bn promised to the Affordable Homes Scheme to help build 180,000 more homes.
  • £1.8bn funding announced to make 1,500 hectares of brownfield sites and derelict homes available for new homes.
  • A new Residential Property Developers Tax to be levied on developers with profits above £25m, at a rate of 4%.This new tax will help create a £5 billion fund to remove unsafe cladding from highrise buildings.

Education and Youth Services

  • A further £2.6bn will be allocated over the next three years to create 30,000 more school places for students with additional needs
  •  £1.8bn to fund catch-up and tutoring classes for students in England. This will be divided into £1bn for primary and secondary schools and £800m for colleges and further education (students aged 16-19 years). This brings the total of funding allocated to the education sector to catch up, post Covid, to £5bn.
  •  £560m to fund a new "Multiply" programme to improve adult numeracy skills through free personal tutoring, digital training, and flexible courses
  • Additional funding for Youth Clubs and sports facilities.
  • Funding to develop derelict ground into parks.

Other Announcements

  • £6 billion of funding to help the NHS catch up with the testing and scanning backlogs
  • The Devolved Administrations will get a funding boost with an increase to the Scottish Government funding in each year by an average of £4.6 billion, £2.5 billion for the Welsh Government, and £1.6 billion for the Northern Ireland Executive
  • £1.7bn of additional funding from the Treasury’s new Levelling Up Fund was announced, to develop and improve public transport in regional towns and cities, including Stoke-on-Trent, Leeds, Doncaster and Leicester. This is in addition to the £21bn on roads and £46bn on railways previously announced, to improve journey times between cities.
  • £300 million will go towards the new “A Start for Life” parenting programmes, with an extra £170 million by 2024/25 going into paying for childcare.
  • An extra £2.2 billion has been announced for courts, prisons and probation services, including £500,000 to reduce the courts backlogs.
  • Tax relief for museums and galleries, which was due to end in March of next year, has been extended for two more years, until March 2024. This rate of relief will double until 31 March 2023, and then return to the present rate until March 2024.
  • A fund of £850m has been made available so that over 100 regional museums and libraries can be renovated, restored and revived.
  • A new consultation to be launched for an Online Sales Tax.

So what was missing from today's announcements?

  • Considering the increased urgency surrounding the topic of Climate Change, this budget seems to be missing a "green focus". In fact, it's announcements on duties on internal flights and fuel duties, will be seen by many as a step backwards.
  • No direct support was offered for soaring household energy bills.
  • Business leaders had been calling for more drastic changes to the business rates system and help to tackle the ever increasing move to online shopping. Other than a reference to a consultation to be launched into an Online Shopping Tax, they may be left wanting.

Annnnd phew! That's the main point's...I think. Feel free to contact us with points I may have missed- support@listentotaxman.com.

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