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Autumn Budget 2021 commentary: Private Client

Our Private Client experts react to the Chancellor's Autumn Budget on 27 October.

Stefanie Tremain: Director

High Income Child Benefit Charge

Lots of talk around supporting working families but no change to the unfair and overly complicated High Income Child Benefit Charge mentioned, which would have been an easy and sensible win.

No doubt largely in response to the recent Wilkes case the government will legislate that HMRC may use “discovery” assessments to recover certain tax charges, including the High Income Child Benefit Charge. It’s a shame they have taken the time to legislate for this but not to simplify the charge itself, which is incredibly complicated and unfair, especially for a tax that applies to a high number of taxpayers outside of Self Assessment.

UK residential property

The Finance Bill 2021/22 will extend the deadline for reporting the sale of UK residential property and the payment of tax for UK residents and non-residents to 60 days (up from 30 days). This is good news, and a sensible change. 30 days is just not long enough when there is any complexity to the CGT calculation.

Robert Pullen: Partner

EU tax relief roll back starts

Today the chancellor announced that research and development credits for companies will be limited to more closely align with UK activity from April 2023.

There are many other tax reliefs which are extended to EU businesses, individuals, and charities, despite Brexit. This includes giving the personal allowance to EU residents to offset UK income such as rental profits and allowing gift aid on donations to EEA charities.

The research and development announcement may signal the start of the Government scouring the legislation to remove all similar reliefs – something to watch out for in the detail and in future budgets. Whether this will ruffle the feathers of the EU is yet to be seen.

Robert Salter: Director

Change to the ‘marginal tax rate’ associated with the Universal Credit

The plan by Rishi Sunak to reduce the ‘tax clawback’ associated with Universal Credit from an effective rate of 63% to a new reduced rate of 55% should be welcomed. The clawback of 8% does represent a real tax cut for individuals on the National Living Wage, for example, who take on additional hours or get promoted.

A 55% tax rate is still excessive when compared to the tax rates faced by the majority of the population. As such, while the change is welcome, it certainly doesn’t go far enough to fully address the tax penalty that such families face, and the Government could certainly have looked at going further in this regard. After all, if a marginal tax rate of 45% is fair for the highest earners in society, it should be no higher – and indeed probably considerably lower – for those on the lowest income levels.

Education agenda

While Chancellor Rishi Sunak has promoted the ‘education agenda’ as part of today’s Budget, the reality is that he hasn’t done anything to directly support workers who want to invest in their own careers.

In many other modern economies, workers who wish to spend their own money (and time) on upskilling and learning new skills are able to subsequently get tax relief against their future earnings in due course.  In contrast, the Government still provides no tax relief in the UK for such personal investment in one’s career, which means that people looking to become HGV drivers, for example, get no relief for the costs – often £4,000 – £5,000 per trainee – that they incur in trying to qualify to drive these trucks.

If the Government is serious about encouraging an entrepreneurial economy and personal responsibility on the part of the wider population, it should be encouraging people to directly choose how they develop their careers and the opportunity to continue learning throughout their whole career.

Alcohol duties regime

The changes to the alcohol duties regime in today’s budget will be welcomed by most beer and wine drinkers and the hospitality industry in general.

However, while these changes will result in a small reduction to wine and beer prices – particularly in our pubs – through the reduction in alcohol duties, the reality is that this drop in alcohol duties will not be seen by the general public.  Rather, costs in beer, cider, and wine prices in pubs, will increase because of the 6.6% increase in the National Minimum Wage and the already announced increase in employer NIC charges to 15.05% from April 2023.

Fiona Fernie: Partner

The Government has reiterated its commitment to clamping down on promoters of tax avoidance schemes, an area which has proved to have significant problems in the past, not least because many of the promoters are based offshore. The announcement that a new penalty will be introduced in Finance Bill 2021-2022 on UK entities supporting promoters is therefore welcome, since it should mean that it is less easy for promoters to bring their products to the attention of the UK public.

It is also helpful that the Finance Bill will contain measures to share more information with the general public to enable taxpayers to recognise avoidance schemes and steer clear of them. Previously there has been a lack of readily available information and many taxpayers have become involved in such schemes thinking that they were wholly legitimate – based purely on what the promoters have told them.

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