HomeTaxThe Budget: what did the Chancellor pull from the Red Box?

The Budget: what did the Chancellor pull from the Red Box?

Companies operating in the retail, hospitality and leisure sectors were the potential winners in Chancellor Rishi Sunak’s Autumn Budget, delivered on 27 October.

They will benefit from a new 50% business rates discount (up to £110,000), while an overhaul of duty on alcohol will help the UK’s pubs with a 5% cut to duty on beer and cider served from draught containers over 40 litres.

“Pubs, music venues, cinemas, restaurants, hotels, theatres, gyms, any eligible business can claim a discount on their bills of 50%, up to a maximum of £110,000,” the Chancellor said.

He added that this was not a temporary measure, but a “long-term investment in British pubs of £100m a year and a permanent cut in the cost of a pint by 3p.”

And in the Budget’s worst-kept secret, Sunak announced that the National Living Wage is set to rise from £8.91 to £9.50 an hour for those aged over 23. It is a 6.6% increase in the minimum pay rate for those over 23 and is more than twice the current 3.1% rise in the cost of living.

Domestic flights tax break

Domestic air passengers will also benefit from a 50% lower rate of Air Passenger Duty, although long-haul fliers will face an increase in the tax if their journey is longer than 5,500 miles.

And culture and the arts were given a boost, with an investment of £850m for cultural institutions and venues. In addition, more than £75m will be spent to help 110 regional museums and libraries improve their buildings and level up their digital facilities.

Some £1.6bn will provide up to 100,000 16 to 19-year-olds studying for T-levels – technical-based qualifications – with additional classroom hours, while 24,000 traineeships will also be created.

The Chancellor also announced the £1.4bn Global Britain Investment Fund will boost key innovative sectors by handing out grants to encourage internationally mobile companies to invest in the UK’s critical industries, including life sciences and automotive.

‘Underwhelming’

Nimesh Shah, CEO of tax firm Blick Rothenberg, described it as “an underwhelming Autumn Budget statement from the Chancellor.”

He said: “The government had tactically already announced the Health and Social Care Levy last month; alongside the March Budget announcement to freeze personal allowances for the next five years, working families will be worse off from next April.

“There was some relief for businesses – an extension of the annual investment allowance, which has become customary practice, a broadening of qualifying expenditure for R&D tax relief and a business rates discount for businesses in the tourism, hospitality and leisure sector.

“The time the Chancellor spent talking about niche taxes during his speech highlighted that he had run out of things to talk about – reform to tonnage tax, air passenger duty and alcohol duty have never had so much attention, yet no mention of income tax, National Insurance and VAT, the big three tax revenue raisers.”

Pressure on small business

Claire Bennison, head of ACCA UK, said: “We are concerned about pressures building on small businesses who are now faced with paying back tax on the £20 billion plus worth of grants and support they received to keep them afloat during the early stages of the pandemic until April 2021. 

“This huge tax demand will hit companies who are just regaining profitability and adds to squeezes due to increased tax on dividends and employers’ National Insurance for the health and social care levy.”

She added: “While the chancellor has cut costs by announcing cuts in business rates for the retail, hospitality and leisure sectors, we are disappointed that today’s Budget did not take the opportunity to support the tourism and entertainment sectors further by keeping their VAT rate at 12.5% beyond next April and for the remainder of this parliament. A lower rate of VAT would help to ensure people keep coming through the doors regardless of locality or size of the business.”

Best of the rest

Other measures announced included:

  • A £150m fund for the British Business Bank will encourage the development of regional networks of ‘angel’ investors to help entrepreneurs start up their businesses.
  • The Annual Investment Allowance of £1m extended to March 2023.
  • £21bn is to be invested in roads and £46bn on railways, with the planned rise in fuel duty will be cancelled.
  • £24bn is earmarked for housing, with £11.5bn set aside to build up to 180,000 affordable homes, with brownfield sites targeted for development.
  • On Universal credit, the Chancellor is to cut the taper rate from 63% to 55%.
  • Scottish government funding is up by £4.6bn, Welsh government funding by £2.5bn, and £1.6bn for the Northern Ireland Executive.

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