FREQUENTLY ASKED BUSINESS QUESTION
What were the main tax measures introduced by Chancellor Rishi Sunak in last week’s Autumn Budget?
Last week’s Autumn Budget tinkered at the edges of the UK tax regime with announcements on the annual investment allowance limit, the new residential property developers tax, R&D tax relief, tax on disposal of land and property reporting and creative sector reliefs and various duties. Northern Ireland specific matters were also featured.
There were no changes to capital gains tax nor did any changes on inheritance tax materialise as potentially expected following Office of Tax Simplification reviews.
Autumn Budget | Changes for 2022
- Taxpayers are reminded of the changes to national insurance and dividend tax rates announced last month which will take effect from April 2022. From April 2022, the Government is increasing by 1.25 percent the rate of income tax on dividends. The new rates will be 8.75% for basic rate taxpayers and higher rate taxpayers will pay 33.75%. Additional rate taxpayers will pay 39.35%.
- At the Spring Budget the Chancellor confirmed that the annual investment allowance limit for expenditure on plant and machinery and integral features would remain at £1 million until 31 December 2021 after which it would fall to £200,000. The Autumn Budget announced that there will be no reduction from 1 January 2022 and that the limit will remain at £1 million until 31 March 2023.
- More information was provided on the new residential property developers tax (“RPDT”) announced in February 2021. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million. The RPDT applies to profits arising in accounting periods ending on or after 1 April 2022.
- Following consultation the categories of qualifying expenditure for R&D tax relief purposes are to be expanded to include data and cloud costs. The Budget documents also confirm that reforms will be implemented “to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and to target abuse and improve compliance.” The Chancellor’s speech referred to this as focusing R&D tax reliefs on domestic activity taking place in the UK.
- These changes will be legislated for in Finance Bill 2022/23 and will take effect from April 2023. Further details of these changes and next steps will be set out as part of the Government’s further tax administration and maintenance announcements later in the autumn.
Autumn Budget | Capital Gains Tax (CGT) Deadline Extensions
In some good news, the time limit for making a CGT return and the associated CGT payment on a disposal of UK land and property is now extended from 30 days to 60 days. This takes into consideration feedback from various stakeholders in respect of problems experienced with the 30 day reporting and payment system. This means that taxpayers with a completion date on or after 27 October 2021 now have 60 days to report and pay any tax due on the disposal The reporting and payment date remains at 30 days for transactions completed up to 27 October 2021.
And finally, reforms to tax calculations for the self-employed, announced by the Chancellor in last week’s Budget, will result in a significant acceleration of tax payments by businesses affected by the change. The suggested £1.7 billion raised by the measure over the next five years makes it the biggest tax raising measure confirmed in the Budget.
A policy paper published on the same day as the Budget confirms the government’s plans to reform the ‘basis period’ rules which determine how trading income for unincorporated businesses (that is, self-employed sole traders and partnerships) is allocated to tax years. The proposal is to change the allocation so that it will be based on the profits or losses arising in the actual tax year, rather than (as now) in accordance with the accounting period ending in the tax year. The new ‘tax year basis’ will apply from the tax year 2024-25, in anticipation of the start of Making Tax Digital for income tax self-assessment in April 2024, with a transition to the new regime in the tax year 2023-24. The measure will only affect businesses which draw up annual accounts to a date other than 31 March or 5 April.
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