Budget Review 2021

The Autumn Budget and Spending Review 2021 was presented to Parliament on 27 October 2021

Associated documents are available in full at

Autumn Budget and Spending Review 2021 documents

In particular

The Budget Red Book (pdf)

Policy Costings (pdf)

Given the propensity of the Government in particular, and politicians in general, to break promises as and when required, it remains to be seen how closely the plans work out in practice.

Details, extracted from the Policy Costings documents are summarised as follows:

  • Local Authorities: reserves implications of Council Tax referendum principles
  • These consist of a core referendum principle of 2%, a 1% Adult Social Care (ASC) precept, and a £10 Police precept.

  • Business Rates: continuation of retention pilots between 2022-23 and 2024-25
  • In 2017-18, the government set up arrangements to allow local authorities in some areas to retain a greater share of their locally raised business rates than the standard amount. These changes are assumed to continue until 2024-25.

  • Health and Social Care Levy introduced from April 2022: gross yield
  • This measure provides for a temporary 1.25 percentage point increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions for the 2022-23 tax year. From April 2023 onwards, National Insurance contributions rates will decrease back to 2021-22 tax year levels and will be replaced by a new 1.25% Health and Social Care Levy. Individuals above State Pension age will not be affected by the temporary increase to National Insurance contributions for the 2022-23 tax year but will be liable to pay the levy from April 2023.

  • Increase Rates of Dividend Tax by 1.25% from April 2022
  • This measure increases all rates of dividend tax by 1.25 percentage points from April 2022.

  • Universal Credit: reduce taper rate from 63p to 55p and £500 p.a. increase in work allowances from 1 December 2021
  • This measure reduces the Universal Credit (UC) taper rate from 63% to 55%. This means a claimant’s award will be reduced by 55p, rather than 63p, for every £1 of net earnings above any work allowance. It also provides a fixed cash increase of £500 per year to UC work allowances. The work allowances are the amount that can be earned before the UC taper rate applies. A household is eligible for a work allowance if either adult has responsibility for a child, or if either adult has limited capability for work. This measure will be effective by December 2021.

  • Fuel Duty: one year freeze in 2022-23
  • Freezes rates of fuel duty for 2022-23

  • Alcohol Duty: reform to alcohol duties
  • This measure will reform the alcohol tax system, with the aim of harmonising and rationalising the duty structure. This includes changes to the rates and structures of the duty categories including those for draught products below 8.5% ABV. These reforms will also mean that all alcohol duties will be charged based on alcoholic strength (ABV – alcohol by volume) as opposed to the volume of finished product, as is currently the case for some duties. The reforms will come into effect in February 2023.

  • Alcohol Duty: one year freeze from February 2022
  • This measure will freeze beer, wine, spirit and cider duties on 1st February 2022, for a year.

  • Universal Credit: maintain the surplus earnings de minimis threshold at £2,500 per month in 2022-23
  • In Universal Credit, a claimant’s ‘surplus earnings’ (earnings in excess of the level of earnings that would result in a Universal Credit award of £0) in a given month can be carried forward, reducing the level of their award for up to six further months. Currently, the first £2,500 of surplus earnings per month cannot be carried forward – this is called the de minimis threshold. This measure will keep the de minimis threshold in Universal Credit at £2,500 for 2022-23 rather than lowering the threshold to £300 as planned. This measure iseffective from 1 April 2022 until 31 March 2023.

  • Shared Accommodation Rate (SAR) exemption for victims of domestic abuse and victims of modern slavery
  • The government will bring forward exemptions to the Shared Accommodation Rate (SAR) for victims of domestic abuse and victims of modern slavery, from October 2023 to October 2022. These vulnerable claimants will be able to claim the higher 1-bedroom self-contained Local Housing Allowance (LHA) rate.

  • Business Rates: 50% relief for Retail, Hospitality and Leisure sectors in 2022-23, £110,000 cash cap
  • This measure grants a 50% business rates discount to businesses occupying eligible retail, hospitality and leisure properties in England up to a cash cap of £110,000 per business. This discount will apply for 12 months from 1 April 2022.

  • Business Rates: freezing the multiplier in 2022-23
  • This measure will freeze the business rates multiplier for 12 months from April 2022. This will maintain the small business multiplier at 49.9p and the standard multiplier at 51.2p, rather than uprating them in line with Consumer Price Index (CPI) inflation to 51.4p and 52.7p respectively

  • Business Rates: relief for property improvements from 2023-24
  • This measure will provide 12 months of 100% business rates relief on qualifying improvements to existing properties from 1 April 2023 until 31 March 2028.

  • Business Rates: support for green technology from 2023-24
  • This measure will exempt eligible plant and machinery used in onsite renewable energy generation and storage from business rates, as well as providing a 100% relief for eligible heat networks that have their own business rates bill. This measure will take effect from 1 April 2023 and run until 31 March 2035.

  • Business Rates: extending the supporting small business and transitional relief schemes in 2022-23
  • This measure will extend the transitional relief for small and medium sized businesses and the supporting small business scheme into 2022-23. Transitional relief is only being extended for properties with a rateable value below £100,000. This measure will restrict bill increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in greater London) and 25% for medium properties up to £100,000.

  • Business Rates: administrative changes to clarify eligibility for the smaller business multiplier
  • This measure will result in all properties with a rateable value of £51,000 using the small business multiplier from 2024-25. Currently, empty properties or properties claiming charity relief are charged using the standard business rates multiplier.

  • Annual Investment Allowance: extension of £1m level until 31 March 2023
  • The Annual Investment Allowance (AIA) provides businesses with 100% tax relief on qualifying investment up to an annual level. This measure extends the Annual Investment Allowance at £1,000,000 from 31 December 2021 until 31 March 2023

  • Museum, Galleries and Exhibition Tax Relief (MGETR) sunset clause: extend to March 2024
  • This measure extends the Museums, Galleries and Exhibition tax relief (MGETR) until 31 March 2024. The relief was due to expire in March 2022 after being introduced in April 2017.

  • Theatre, Orchestra & MGETR Tax Relief: two-year tapered rate increase from April 2022
  • This measure temporarily increases the Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibition Tax Relief (MGETR) rates. From 27 October 2021, the headline rates for TTR and MGETR will temporarily increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively. From 27 October 2021, OTR rates will temporarily increase from 25% to 50%, reducing to 35% from 1 April 2023 and returning to 25% on 1 April 2024.

  • HGV Road User Levy: suspend from August 2022 to 31 July 2023
  • This measure will suspend the heavy good vehicle (HGV) Road User Levy for 12 months, from 1 August 2022 to 31 July 2023. It applies to registered keepers of HGVs, registered in the UK, and drivers and owners/operators of HGVs from outside the UK accessing the UK road network.

  • Vehicle Excise Duty: freeze rates for HGVs in 2022-23
  • This measure freezes heavy goods vehicle (HGV) Vehicle Excise Duty (VED) for 2022-23 at 2021-22 levels. This measure will be effective from 1 April 2022.

  • Bank Surcharge: set at 3% and raise the surcharge allowance to £100m
  • The measure sets the supplementary charge levied on all banking entities at 3% and changes the allowance available for banking groups from £25m to £100m. The measure will begin on 1 April 2023 for all accounting periods starting on, after or straddling that date.

  • Asset Holding Companies tax regime from April 2022
  • This measure provides a new tax regime for qualifying asset holding companies (QAHCs), used in collective and institutional investment structures to facilitate the flow of capital, income and gains between investors and underlying investments. Taxation in the new regime is based on existing tax rules but with some amendments. This measure will be effective from 1 April 2022

  • Air Passenger Duty: introduction of a new reduced domestic band and ultra-long haul distance band
  • This package introduces two new measures. A new domestic distance band for APD, covering flights within the UK. The domestic rates will be set at £6.50 for reduced rate, £13 for standard rate and higher rate passengers will continue to pay Band A rates. An increase in the number of APD international distance bands from 2 to 3. A new ‘Band C’ will be introduced, which applies to flights where the capital city of the final destination is over 5,500 miles from London. The new Band C reduced rate will be £4 greater than Band B and will use the Band B multipliers to determine the standard and higher rates. These measures will have effect in relation to the carriage of passengers on or after 1 April 2023

  • Capital Gains Tax: increase in property disposal payment window from 30 to 60 days
  • This measure extends from 30 days to 60 days the time limit for making Capital Gains Tax (CGT) returns and associated payments on account when disposing of UK land and property. This measure also clarifies the rules for mixed use properties, which apply to UK residents only. This measure will have effect for disposals that complete on or after 27 October 2021.

  • Starting rate for savings limit: maintain at £5,000 for 2022-23
  • This policy maintains the starting rate of savings band at £5,000 in 2022-23, rising with CPI thereafter.

  • Adult ISA subscription limit: maintain at £20,000 for 2022-23
  • This measure retains the adult ISA subscription limit at £20,000 for 2022-23, rising with CPI thereafter.

  • Carbon Price Support rates: maintain in 2023-24
  • The UK has two carbon pricing policies designed to reduce emissions from power generation: the UK Emissions Trading System (UK ETS) and the Carbon Price Support (CPS) rate of Climate Change Levy. This measure will freeze CPS rates in 2023-24. The CPS rates outlined in this measure relate to the period from 1April 2023.

  • Car fuel benefit charge: uprate by CPI in 2022-23
  • The car fuel benefit charge is imposed when an employer provides an employee with fuel for a company car that is available for private use. This measure will increase the car fuel benefit charge from April 2022 in line with growth in the Consumer Price Index (CPI).

  • Van fuel benefit charge: uprate by CPI in 2022-23
  • The van benefit charge is imposed when an employer provides their employee with a van which is available for private use. This measure will increase the van benefit charge from April 2022 in line with growth in the Consumer Price Index (CPI).

  • Aggregates Levy: freeze in 2022-23
  • This measure freezes the Aggregates Levy (AGL) rate at £2 in 2022-23. The AGL rate outlined in this measure will take effect on 1April 2022

  • Tobacco Duty: increase hand rolling tobacco duty by an additional 4% and minimum excise duty by an additional 1% in 2022-23
  • It was previously announced that tobacco duties would rise by RPI+2% for the duration of the parliament. This measure increases the specific duty on Hand Rolling Tobacco (HRT) by 4 percentage points above the pre-announced duty rate increase. The measure also increases the Minimum Excise Tax (MET) by an additional 1 percentage point. This measure will be effective from 6pm on 27 October 2021.

  • Apply the VAT second hard margin scheme in Northern Ireland legislatively
  • Moving back the Pension Credit to Housing Benefit merger date from April 2021 to April 2025
  • The government plans to create a new housing element of Pension Credit (PC), replacing pensioner Housing Benefit (HB), in 2025, to align with the full rollout of working-age Housing Benefit into Universal Credit.

  • Net pay pension schemes: 20% top-up for eligible individuals on contributions from April 2024
  • This measure will provide a 20% end-of-year top-up to low-earning individuals who save into their pension via Net Pay Arrangements (NPA). This measure will affect contributions made from the 2024-25 tax year onwards.

  • BBC commercial arm borrowing limit: stepped increase from £350m to £750m
  • The government sets a borrowing limit to cap the amount of debt that the BBC’s commercial arm (BBC Commercial Holdings) can hold from commercial lenders. The government will increase this borrowing limit to £750m, more than double the current limit of £350m, in phases between 22/23 and 26/27.  

  • HM Land Registry: increase caseworker capacity
  • As part of the Spending Review, Her Majesty’s Land Registry (HMLR) is investing in additional caseworker capacity and automation in the short term to address a backlog of cases for updating or changing the Land Register. This measure covers the additional exchequer revenue from processing these outstanding registrations.

  • Removing cross-border group relief
  • This measure will repeal the rules that allow EEA-resident companies to surrender foreign losses as UK group relief in certain circumstances. It will also align the rules for all non-resident companies surrendering losses of a UK permanent establishment (PE) for group relief. The policy will take effect from 27 October 2021.

  • Residential Property Developer Tax: 4% rate
  • This measure levies an additional 4% supplementary charge on an adjusted corporation tax (CT) base of residential property developer companies, above a threshold of £25 million group profits. This measure will be effective from April 2022.

  • State Pension and Pension Credit: uprate with Double Lock in 2022-23
  • Due to the distortions to reported average wage growth this year – caused by the economic effects of the pandemic, related government labour market interventions and the unique speed of the recession and recovery – for 2022-23 only, the government is legislating to suspend the earnings uprating of the ‘Triple Lock’. Instead, the basic and new State Pensions, the Standard Minimum Guarantee (SMG) in Pension Credit, and Survivor’s Benefits in Industrial Death Benefit, will be uprated by at least the higher of CPI or 2.5%.

  • Economic Crime (Anti-Money Laundering) Levy
  • The levy will fund new and uplifted anti-money laundering (AML) capabilities. It will be a fixed fee paid by entities subject to the Money Laundering Regulations (MLRs) based on their size as determined by their UK revenue. The levy will first be charged on entities that are AML regulated during the financial year 1 April 2022 to 31 March 2023

  • Freeports (reliefs on Stamp Duty, Enhanced Capital Allowances, Structures and Buildings Allowance, NICs and Business Rates)
  • This measure provides several tax and customs reliefs for English Freeports within specified Freeport tax or customs sites. In Freeport tax sites this will include an enhanced capital allowance (ECA), Structures and Buildings Allowance (SBA), Business Rates relief and a Stamp Duty Land Tax (SDLT) relief between tax site designation and 30 September 2026. From April 2022 there will also be an Employer National Insurance Contributions relief that will run until at least April 2026. These reliefs will all be subject to their own eligibility criteria and some have additional time limits. In Freeport customs sites there will be customs duty benefits for eligible businesses including duty suspension, as well as favourable duty treatment for goods leaving them. Businesses will also be able to benefit from VAT and excise duty suspension whilst goods are retained within these sites

  • Self-Employment Income Support Scheme fifth grant: design choices relating to the financial impact declaration
  • The Spring Budget 2021 announcement for a fifth Self-Employment Income Support Scheme (SEISS) grant included a Financial Impact Declaration (FID) that determined whether applicants were eligible for either a higher or lower grant amount based on how much their turnover had reduced.

    Since this announcement, two design choices were made which impacted on cost:

    • Claimants were able to use an alternative ‘reference year’ for the FID
      (2018-19) if they believed that tax year more accurately reflected the usual
      turnover of their trade than 2019-20.
    • Claimants who started trading in 2019-20 and did not trade in all
      of 2018-19, 2017-18 and 2016-17 automatically received the 80 per
      cent grant.

    The fifth SEISS grant period covered May 2021 to September 2021

  • Business Rates: Covid-19 additional relief fund
  • This measure, which was announced on 25 March 2021, provides £1.5 billion of additional support to businesses that have experienced adverse economic effects as a result of the COVID-19 pandemic, but have been unable to benefit from the existing support linked to business rates. The fund will be awarded through local authorities, taking into account the economic impact COVID-19 has had on specific sectors, and the local stock of property.

  • Business Rates: ruling out Covid-19 as a Material Change in Circumstance
  • This measure captures the impact of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill which removes COVID-19 restrictions as grounds for a Material Change of Circumstance (MCC) appeal on rateable value for business rates. This will reverse the reduction in business rates yield previously forecast as a result of MCC appeals on COVID-19 restrictions grounds.

  • Right to Buy: changes to rules under which Local Authorities can retain and spend receipts from Right to Buy sales
  • This measure changes the rules for how local authorities can re-invest Right to Buy receipts (money raised from Right to Buy sales). The changes being made include:

    • Extending the timeframe local authorities have to spend new and existing Right to Buy receipts from 3 years to 5 years.
    • Increasing the percentage cost of a new home that local authorities can fund using Right to Buy receipts from 30% to 40%.
    • Introducing a cap on the use of Right to Buy receipts for acquisitions to help drive new supply with effect from 1 April 2022, and phased in over 2022-23 to 2024-25.
    • Allowing receipts to be used for shared ownership and First Homes, as well as housing at affordable and social rent.

    These changes took effect from 1 April 2021, with the exception of the acquisition cap, which will be introduced from 1 April 2022, on a phased basis.

  • Super-deduction: extension to background plant and machinery
  • This measure allows companies to claim a 130% first year allowance on main rate expenditure and a 50% first year allowance on special rate expenditure on plant or machinery provided for leasing under an excluded lease of background plant or machinery for a building. These allowances are available for expenditure incurred between 1 April 2021 and 31 March 2023.

  • Real Estate Investment Trusts: amendments
  • This measure makes amendments to the tax rules applying to Real Estate Investment Trusts (REITs), including some of the conditions that determine whether a company qualifies to be a UK REIT. The changes: relax the listing requirement where the company is substantially owned by large institutional investors; amend the overseas institutional investor rules so that these apply to the overseas entity rather than the law in the overseas jurisdiction; relax the Holders of Excessive Rights rule, so it only applies to entities where Withholding Tax is required; and simplify the balance of business test,and amend the list of items excluded from that test. The policy will be effective from 1 April 2022.

  • Extension of eligibility for bereavement benefits to cohabitees with children
  • The Government announced in July 2021 that it will extend eligibility for both Bereavement Support Payments and Widowed Parents Allowance for people with children who were cohabiting with a partner but who were not married or in a civil partnership. This will likely come into effect in summer 2022 once the Remedial Order is approved by Parliament.

  • DWP Disability Green Paper: measures
  • This consists of two measures announced in the Health and Disability Green Paper. The first expands the Special Rules for Terminal Illness (SRTI) so that people are eligible if they are reasonably expected to be in their final 12 months of life, rather than six months as currently. SRTI allows these individuals to make fast-tracked claims to a number of disability and incapacity benefits. The second measure is no longer going ahead with the proposed 18-month minimum award period for those receiving Personal Independence Payment (PIP).

  • Universal Credit: reintroduce Minimum Income Floor from 1 August over 12 months and 1 month notice period for claimants
  • The Minimum Income Floor (MIF) in Universal Credit is used to calculate self-employed claimants’ monthly awards by assuming a minimum level of earnings. The government temporarily suspended the MIF in March 2020 to provide additional support for self-employed people on low incomes during the Covid-19 pandemic. The MIF is being reintroduced gradually from 1st August 2021. This measure extends the reintroduction period to 12 months, enables work coaches to disapply the MIF for up to six months where claimants’ earnings continue to be affected by the Covid-19 pandemic, and provides a one-month notice period to claimants before the MIF is applied.

  • Reform of penalties for late submission and late payment of tax for Income Tax Self-Assessment: change to implementation date
  • This measure changes the implementation date for the Spring Budget 2021 measure to reform penalties for late submission and late payment of tax for Income Tax Self Assessment (ITSA) to:

    • April 2024, for taxpayers mandated for Making Tax Digital ITSA beginning
    • on or after 6 April 2024.

    • April 2025, for all other taxpayers in ITSA.
  • Making Tax Digital for Income Tax Self Assessment: change to implementation date and digital prompts
  • This measure changes the implementation date for the mandation of Making Tax Digital ITSA customers with business and / or property incomes over £10,000 from April 2023 to:

    • April 2024, for ITSA customers who are sole traders or landlords
    • April 2025, for ITSA customers who are classed as general partnerships

    The measure also allows for some voluntary sign ups of ITSA customers in pilot phases before 2024, and voluntary sign ups of ITSA customers with income under £10,000 in years from 2024. The measure also introduces a new risking tool as part of the Making Tax Digital Software from April 2024.

  • Income Tax: basis periods reform for the Self-Employed from April 2024 with transition year in 2023-24
  • Basis periods are a set of tax rules that govern the timing of when income is assessed. This measure will align all basis periods for self-employed individuals and partners with the standard tax year.
    This measure will be effective from April 2024, with a transition tax year in 2023-24. During the transition tax year, overlap relief can be used, and any profit generated during the realignment of the basis period with the tax year can be spread over a five-year period for tax purposes, starting with the transition year.

  • Notification of uncertain tax treatment: changes to scope
  • At Budget 2020 the government announced the uncertain tax treatment (UTT) measure, which introduced a requirement for businesses with a UK turnover above £200 million per year, or a UK balance sheet total of more than £2 billion, to notify HMRC where they adopt a tax treatment relying on an uncertain legal interpretation. This measure increases the threshold condition for the tax advantage associated with an uncertain amount under the existing notification of uncertain tax treatment (UTT) from £1m to £5m. It also removes one legislative criterion (“trigger”) that businesses would have considered before notifying HMRC of the uncertain tax treatment. The trigger being removed would have required businesses to make a notification where there is a substantial possibility that a court or tribunal would find the treatment adopted to be incorrect. This measure will be effective from 1 April 2022.

  • Access to Benefits for arrivals under the Afghan Relocations and Assistance Policy and the Afghan Citizens Resettlement Scheme
  • This measure ensures that individuals coming to the UK from Afghanistan, including those under the Home Office resettlement schemes, are eligible for Child Benefit and DWP income-related benefits from their first day in the UK.

  • Clamping down on promoters of tax avoidance
  • This package of measures will introduce new legislation consisting of four parts, designed to reduce the tax avoidance market:

    • imposing new penalties for UK entities that support offshore promoters
    • allowing HMRC to apply to the court to freeze a promoters’ assets so that
      the penalties promoters incur are paid
    • allowing HMRC to petition the court to wind up companies and
      partnerships involved in promoting tax avoidance
    • supporting taxpayers to identify and steer clear of or leave tax avoidance

    This measure comes into effect on Royal Assent of the 2021-22 Finance Bill.

  • Public Service Pensions Remedy (McCloud)
  • When reformed public service pension schemes were introduced in 2014-15, the government agreed, following negotiations with Trade Unions, to allow those close to retirement to remain in their existing pension scheme; this was known as’transitional protection’. This was later found by the Court of Appeal to be discriminatory. In July 2021 the government introduced the Public Service Pensions and Judicial Offices Bill to retrospectively amend the transitional arrangements and thereby provide a ‘remedy’ to address this discrimination. The Bill provides that all affected members will be members of the relevant legacy pension scheme for the remediable service period (1 April 2015 – 31 March 2022). However, when they take their benefits, they will be able to choose to instead receive reformed scheme benefits. Public service pension schemes will therefore pay additional benefits in the 2023/24 financial year onwards.