The UK Chancellor, Rishi Sunak, delivered the 2021 Autumn Budget on 27 October.
As usual, his speech, and the published report, outlined the government’s taxation and spending plans and priorities for both the short and long term.
Clearly, living in Australia, you’re somewhat detached from day-to-day financial issues back in the UK. Additionally, with all countries facing economic challenges post-pandemic, you’re probably exercised enough by the Australian economy without worrying about the UK as well!
However, you may well have family back in the UK who clearly will be affected by what the Chancellor announced. You may also be planning to return to the UK at some stage in the near future, or have business interests there, so it may well help to keep abreast of what’s going on.
So, here’s everything you need to know about the UK Autumn Budget and how it could impact you and your family.
Some key measures have already been announced in 2021
There have already been a series of key announcements in the months leading up to this Budget.
In September, the prime minister announced various measures designed to meet the shortfall in UK social care funding. In a previous article we looked at these in some detail.
In summary, these included:
- A rise in National Insurance by 1.25 percentage points for both employers and employees from April 2022
- Dividend Tax also increasing by 1.25 percentage points
- For the first time, working people above State Pension Age are to pay National Insurance at a rate of 1.25% in the form of a new Health and Social Care Levy.
Earlier in the year, the UK chancellor also froze the Personal Allowance, Lifetime Allowance, and various other tax thresholds until at least 2026.
He also announced an increase in UK Corporation Tax to 25% from April 2023.
It’s likely that any family you have in the UK will be impacted by these measures, particularly if they’ve retired or own a business.
The UK economy is recovering quickly
As part of his statement, the Chancellor outlined Office for Budget Responsibility (OBR) projections of future UK economic growth.
It’s estimated that the UK economy will return to pre-Covid levels at the start of 2022.
As is the case in Australia, the UK economy is set to bounce back after the pandemic. The projected growth for 2021 was announced as 6.5%, although this has subsequently been downgraded by the OBR to 5.1% since the Budget was released.
UK growth is then forecast at 6% in 2022, followed by 2.1%, 1.3% and 1.6% over the next three years.
A projected increase in the UK rate of inflation
One announcement that may well hit your family in the UK, plus any businesses you have a stake in is a projected UK inflation rate of 4% over the next year.
This is primarily due to increased demand post-pandemic, and pressure on supply chains.
This is a substantial increase compared with the low levels of inflation the UK has enjoyed in the past 20 years.
It will likely mean a reduction in the value of cash savings in real terms. It also means increased business costs as prices of raw materials, for example, will rise.
There was mixed news when it comes to tax announcements in this Budget statement
The Chancellor made a couple of high-profile announcements designed to help reduce the UK government debt. This has clearly been affected by the pandemic to the extent that, by March 2021 it had increased to 106% of GDP. There will be:
- A new 4% levy on property developers with profits of more than £25 billion, in order to help fund a £5 billion fund to remove unsafe cladding
- An increase in duty for long-haul flights of more than 5,500 miles.
The latter will clearly have an impact on the cost of flights to Australia and could result in a substantial increase in the cost of long-haul travel.
Against those increases, he also made several cuts that will be welcomed:
- The UK bank surcharge, levied on bank profits, will reduce from 8% to 3% from April 2023. This will help improve the position of London as a global financial centre after the UK withdrawal from the EU
- A planned rise in fuel duty has been cancelled.
The deadline for reporting and paying Capital Gains Tax after selling UK property has been increased from 30 to 60 days. This will help if you’re planning to sell property in the UK.
A welcome series of cuts to business rates
If you’re a UK business owner, it’s possible that you’ll benefit from a total of £7 billion cuts to business rates. This will particularly help the retail, hospitality, and leisure sectors with a 50% business rates cut for one year, enabling businesses to claim a discount on their bill of up to £110,000.
Billions earmarked to boost UK house building
If you’re involved at all in UK house building, there were some positive announcements in the Budget:
- An £11.5 billion fund to build up to 180,000 new affordable homes
- A £1.8 billion “brownfield fund” to help free up land for new house building.
Other eye-catching spending announcements
As now seems to be the norm with all Budget statements, the Chancellor took the opportunity to reveal spending commitments designed to appeal to certain key groups of voters – geographical and economic.
- A guarantee to spend £5.7 billion for London-style transport systems across city regions designed to appeal to those outside the capital who feel that the capital gets more than its fair share of government spending
- Appealing to the same audience, the Chancellor confirmed a £1.7 billion “levelling-up” fund targeted at specific, named regions
- He also increased spending on cycling infrastructure by more than £5 billion.
The UK tax burden will reach a record high
The OBR has confirmed that the UK tax burden is set to rise from 33.5% of GDP recorded before the pandemic in 2019/20 to 36.2% of GDP by 2026/27.
This is the highest level since the early 1950s, when the UK economy was struggling after the economic shock of the second world war.
This clearly makes it important to review any UK-based financial arrangements you may still have to ensure you’re taking advantage of tax incentives and allowances to minimise the amount you pay to HMRC each year. You may also want to encourage any family you have in the UK to do the same.
Get in touch
If you have any questions about how the UK Autumn Budget will affect you and your finances, please get in touch.