This week saw Rishi Sunak deliver the Autumn Budget and Spending Review 2021. It was revealed that economic growth is expected to reach 6.5% this year, which is higher than previous estimates had predicted. The UK economy is also expected to return to pre-covid levels by the close of 2021.
Rishi continued his pledge to lower taxes over the remainder of this parliament, however acknowledged that inflation is likely to hit 4% before the end of next year and that rising fuel costs were a cause for concern.
This Budget did not contain any changes to areas such as pensions or tax relief, these areas have already been addressed in previous announcements. It has previously been announced that there will be an increase of 1.25% to National Insurance to provide additional funding for social care, and previous remarks included a freeze on tax allowances, exemptions and reliefs.
Interestingly, documents released after the Autumn Budget and Spending Review confirmed that from April 2023 the new Health and Social Care Levy will be treated separately from National Insurance, which will be payable by those over the State Pension age, which will lead to many more people paying this tax. We were also previously made aware that the pension ‘triple lock’ will become the ‘double lock’ for the next year, which would mean a rise of 3.1% for those in receipt of their State Pension in 2022.
There was one announcement that could impact pension scheme members pockets. This announcement affects low earners who are a member of a workplace pension scheme where pension contributions are deducted before tax has been applied. In these circumstances the member is not receiving any tax relief, whereby their counterparts who are making contributions after tax has been applied are receive 20% tax relief, even if they earn below the threshold to pay tax. Rishi proposed in his Autumn budget announcement to rectify this by making payments to those individuals who are impacted starting in 2024.
The chancellor also announced a reduction in Air Passenger Duty for UK domestic flights, funding for a Beatles exhibition in Liverpool, funding for the UK and Ireland’s men’s football World Cup bid and a simplification of alcohol duties.
The business rates multiplier was frozen for another year, and there is to be a 50% business rates reduction for retail, hospitality and leisure sectors and the £1 million Annual Investment Allowance is to be extended until March 2023. The taper for Universal Credit has been reduced by 8% from 63p to 55p and the government’s Multiply scheme has been provided with additional funding to help adults improve their numeracy.
Have there been any changes in the Budget that will impact your financial plans? If you would like to discuss your financial plans, please feel free to call us for a complimentary initial discussion.
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