On 27th October, Rishi Sunak delivered the latest budget announcement. After a relatively uneventful delayed Autumn 2020 budget in March, where they introduced the three-point plan to rebalance the books after the pandemic, it seemed like we were in store for a swathe of changes this autumn to boost economic recovery further.
We already knew about the 1.25% increase in National Insurance from April 2022 to reduce the strain on the NHS, as well as the year-long freeze on the State Pension triple lock (the guarantee that the state pension will increase every year by the highest of inflation, average wage increase, and 2.5%), and it reducing to a double lock. But, there’s more.
During his opening remarks, Rishi Sunak started with a strong tagline claiming it to be a budget delivering a stronger economy for the British people, with “growth up, jobs up and debt down”.
Here is a summary of the main points:
The economy and public finances
- Inflation reached 3.1% in September, and the Office for Budget Responsibility (OBR) predict inflation will average 4% over the next year
- Annual growth for the UK economy is set to increase by 6.5% in 2021, followed by 6.0% and 2.1% in 2022 and 2023, respectively.
- The economy is expected to return to pre-covid levels by the end of this year, earlier than mid-2022 previously expected
- Borrowing as a percentage of GDP is forecast to fall 7.9% of GDP this year to 3.3% in 2022 and then 2.4% in 2023
- Unemployment is predicted to peak at 5.2% – a decrease from the previous forecast of 11.9% last year
Taxation and wages
- Since February 2020, wages have increased in real terms by 3.4%.
- The National Living Wage will increase by 6.6% from £8.91 to £9.50 per hour from April 2022
- Universal Credit taper rate to be cut by 8%, from 63% to 55%, by 1 December 2021, which will allow people to retain more of the payment they receive
- Tax relief for museums and galleries will apply for a further two years until March 2024
- There were no major changes to Capital Gains Tax (CGT), Inheritance Tax (IHT) or pension tax relief.
- From 6 April 2022, the income tax rate applicable to dividends will increase by 1.25%; 8.75% ordinary rates, 33.75% upper rate, and 39.35% additional rate dividend tax. In addition, the dividend trust rate will also increase to 39.5%.
- 50% business rates discount will apply across retail, hospitality and leisure sectors, up to a maximum of £110,000
- Changes to business rates reformed to support companies, including a new 12-month relief for firms to invest in their premises
- Next year’s planned increase in the business rates multiplier cancelled, worth £4.6 billion over the next five years
- £24 billion earmarked for housing: £11.5 billion for up to 180,000 affordable homes, with brownfield sites targeted for development
- Levelling Up Fund will provide £1.7billion to be invested in local areas across the UK – such as Leicester, Doncaster and Stoke-on-Trent
- Spending on healthcare to increase by £44billion to over £177 billion by the end of this Parliament
- An additional £5.9billion of funding to help address NHS backlog of people waiting for tests and scans
- Additional £2.2billion for courts, prisons and probation services
- The government will invest £7billion for transport projects in areas including the West Midlands, South Yorkshire and Greater Manchester
- The planned rise in fuel duty will be cancelled amid the highest pump prices in eight years
- Schools to receive an extra £4.7billion by 2024-25
- School funding to return to 2010 levels – an equivalent of more than £1,500 per pupil
- £300m to go on “Start for Life” parenting programmes, with an extra £170m promised for childcare by 2024-25
- £2.6billion for creating 30,000 new school places for children with special educational needs and disabilities
- The government are launching a numeracy programme called Multiply to help improve basic maths skills among adults across the UK
Housing and infrastructure
- £21billion on roads and £46billion on railways to improve journey times between cities
- A £24billion package designated to housing
- Further £1.8 billion investment to meet the government’s commitment to £10 billion investment in housing supply and unlock over 1 million new homes
- Reconfirmation of £11.5 billion investment through the Affordable Homes Programme (2021 to 2026), of which £7.5 billion is over this period
- A new 95% mortgage guarantee to ensure homeownership is affordable for all
- A 4% property developer tax will fund the £5.1billion package to replace unsafe cladding for leaseholders in high-rise buildings across England. This new ‘Building Safety Levy’ will apply to firms with a turnover of more than £25m per anum from next year
- £640m a year to address rough sleeping and homelessness
- A simplified system will cut duty rates on alcohol from 15 to six, the most radical change seen in over 140 years
- Small brewer’s relief announced to cut duty on beer and cider sold in pubs
- The cost of a pint will decrease permanently by 3%
- Rates for fortified wines, stronger red wines, and high-strength ciders will increase slightly
- Rates for lower strength drinks, such as fruit ciders, rose wine and liqueurs, will fall
- Internal domestic flights will see a new lower rate of Air Passenger Duty from April 2023
- New ultra long haul band in Air Passenger Duty for flights over 5,500 from April 2023
ISAs & Pensions
Not a lot changed with ISA and pensions, but to recap:
- The annual adult ISA limit for 2022/23 will stay at £20,000
- The annual Junior ISA limit for 2022/ 23 will stay at £9,000
- The annual Child Trust Fund limit for 2022/23 will stay at £9,000.
- The “big freeze” announced on 3rd March 2021 remains unchanged, and the Lifetime Allowance (LTA), Capital Gains Tax (CGT) and Inheritance Tax (IHT) allowance all remain unchanged, seeing no increase in line with inflation. The same goes for income tax thresholds.
- The government announced they would fix the “Net Pay Anomaly”; experienced by those who aren’t receiving pension tax relief through a net pay pension scheme because they are paid less than the personal allowance. It is set to apply from 2024/25, benefitting 1.2m people by approximately £53 on average.
Want to know more?
For a complete breakdown of the financial statement from earlier this week, you can download our comprehensive Budget guide by completing the form below.
If you have any questions about the Budget and how it might affect you, please do not hesitate to get in touch.