The Chancellor of the Exchequer, Rishi Sunak, will be carrying out his red briefcase and laying out his Autumn Budget plans on Wednesday 27th October 2021. The Autumn Budget doesn’t usually attract massive attention, however due to the economic impact of COVID-19 as well as the major supply chain issues caused by Brexit, there will be an intense focus on the next steps taken from the Treasury.
More recently, the soaring increase to energy prices as well as the national fuel shortage is likely to be touched upon due to the implications they have had on millions of households in the UK. There are questions as to whether there will be a hike in taxes, amidst the well-reported rise in National Insurance in early September, however it seems unlikely the Chancellor will raise another main tax. The end of emergency COVID-19 borrowing measures such as the SEIS grants and job retention schemes, also known as furlough, will likely have a detrimental effect on the overall economy with large scale job shortages and business insolvencies predicted by many experts. Guidance and measures on how to tackle this will likely be a key theme in the Chancellor’s speech.
All eyes will be watching Mr Sunak as he announces his plans for the second budget of 2021 and sets the financial recovery process firmly into action. We break down the probable predictions of what is to be announced in the Autumn Budget, whilst examining the potential economic repercussions of the changes.
Government Spending Review Results
Every three years, the government outlines the outcome of a spending review that explains the UK government departments’ resource and capital budgets for 2022-23 to 2024-25, as well as the devolved administrations’ block grants for the same period.
This is where concrete figures are released relating to investment in public services such as the NHS, social care, the criminal justice system, housing, and education. Whilst the government spending review isn’t completely binary, it does provide a significant indicator as to where the government will be looking to spend heavily on over the next few years. With government borrowing at a record high due to the pandemic and multiple lockdowns, this spending review will probably cause some of the biggest headlines from the Autumn 2021 Budget.
There will likely be a concentration on the UK leading the transition to net zero carbon emissions as well as rubberstamping the nation as a scientific superpower through R&D relief schemes.
Stealth Tax Changes
The Chancellor has already admitted that the Autumn Budget will be a ‘technical budget’ meaning the importance is in the detail. There is a strong chance that this will transpire to an influx of relatively small changes to the taxing system which will offer better long-term benefits to the Treasury rather than the immediate short term.
There has already been confirmation of one stealth tax change already, in the form of a reform to basis periods for sole traders and partnerships set for April 2024. This enables business profits to be calculated for the tax year rather than the accounting year, providing an aided impetus for sole traders and freelancers to transition across to the Making Tax Digital quarterly reporting scheme.
Stealth taxes go under the radar and don’t really affect the vast majority of people heavily, however they go some way in recouping national debts over the long-term.
Green Homes Grant Replacement
Much has been made about the rising prices of energy, not least gas and electric, as many energy companies have already collapsed. It remains to be seen whether the government will bail out energy companies, however there is likely to be a concerted effort to promote going green. This is looking even more increasingly likely due to the UK hosting the UN Climate Change conference in Glasgow in November.
A possible amendment to an existing scheme could come in the form of the Green Homes grant. The scheme closed for applications in March 2021 and was negatively received due to its underperforming success. The scheme was set up to help boost energy efficiency of homes across the UK through a voucher incentive scheme that pays for any renovation in transitioning over to greener energy sources.
Despite being warmly welcomed, numerous failures in the scheme transpired including application delays, as well as the fact that the vouchers only covered two-thirds of the costs of switching to more sustainable, renewable energy. If the Green Homes grant were to be reintroduced, there will need to be vast improvements to the logistics of the scheme in order to be successful.
Capital Gains Tax Amendments
With the NIC increase, the government are remaining very tight lipped regarding any further main tax rises. What is likely to happen though is for a reduction in Capital Gains Tax reliefs. CGT is a tax on the profit of a sold item which has increased in value, with only the actual gain of the profit being taxed, not the whole sum of money received from the sale. In November 2020, the Office of Tax Simplification (OTS) advised that CGT should be in line with income tax, suggesting the idea that the CGT rate rise to 20% for basic rate taxpayers and 40% for higher rate taxpayers.
In the March 2021 budget, the Chancellor announced a freezing of the threshold at which Capital Gains tax is paid. This was £12,750 and was set to be in place until 2026. Many are predicting that this is likely to be revisited, albeit amended slightly to claw back some kind of revenue for the Treasury.
Business Relief Boom
Employment is always going to be a major priority on any Chancellor budget, not least this one. There have been whispers that enhanced reliefs to R&D rates could be a surprise announcement, as well as further venture capital tax reliefs for investors through the EIS and SEIS schemes. This is designed to provide a huge injection to business investment as the UK isn’t governed by EU law anymore.
What is most likely though is a further pushing for successor schemes similar to the Kickstart and Apprenticeship Grant scheme. These schemes incentivised employers in hiring young people whilst providing training and development to help them thrive in their respective careers.
Furthermore, the Chancellor is expected to announce more special work visa schemes for EU workers to patch up the skills gap reduction in the short term. This comes as the government have attempted to increase the number of HGV drivers in the wake of the national fuel shortage, with likely sectors such as agriculture, farming, and public services next in line as supply chain issues and worker shortages threaten to weaken an already fragile economy.
We hope this has outlined to you what our predictions are ahead of the Autumn 2021 UK Budget set out by the Chancellor. If you require any further information on any government schemes and announcements, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.