In a budget where Covid 19 was notable by its absence, Rishi Sunak announced a number of measures which had been pre-briefed to the press with a focus on spending increases across the board and little in the way of unexpected tax increases.
There was good news on the economic outlook, with higher than expected growth including a predicted increase in GDP of 6.5% in 2021 and 6% in 2022. Significant reductions in borrowing as a percentage of GDP are also forecast for 2022 and 2023.
On the back of those expectations for growth, the budget announced significant capital expenditure on infrastructure projects including railways, busses and cycling infrastructure. There was funding for skills training together with a number of measures announced designed to support and encourage science technology and innovation. These included:
- Changes to the tax rules for Research and Development Tax Credits, to widen the scope of the rules to include expenditure on data and cloud costs and target relief to R&D activity taking place within the UK.
- Visa changes to allow the recruitment of highly skilled employees from overseas, in particular in the fields of science and technology.
- Increased government spending on Research and Development, including a doubling of the budget of Innovate UK, to increase funding of R&D projects.
There were a number of tax and rates cuts, and further measures designed to rationalise taxation in particular areas, including:
- A 1 year 50% reduction in business rates for 2022/23 for the retail, hospitality and leisure industries, up to a maximum of £110,000.
- Further business rates reductions including a freeze on the business rates multiplier, a relief for green investment and a change to more frequent business rates revaluations.
- An extension to the £1m annual investment allowance for capital expenditure to the end of March 2023.
- A freeze on fuel duties.
- Reductions in Air Passenger Duty on domestic flights within the UK.
- A redesign and simplification of Alcohol Duties, reducing the number of main duty rates and introducing a reduction in duty for drinks served on draught.
- A change to the Bank Corporation Tax Surcharge from April 2023, setting the rate at 28%. This is 1% higher than the current rate, but leaves banks paying only 3% more than the main rate, which will be 25% from April 2023.
New tax increases were thin on the ground, with the major new revenue source being the Health and Social Care Levy, which will add 1.25% to taxes on earnings and dividend income, announced last month.
In a move heavily trailed, the National Living Wage for those aged 23 and over will increase to £9.50 an hour. At the same time there will be an 8% reduction in the Universal Credit taper rate, the rate at which Universal Credit is reduced as people earn more through work, from 63% to 55%.
The Chancellor focused on spending plans, identifying spending on infrastructure, skills and innovation as key. Changes to the tax code were modest, with reductions to business rates and increases to the National Living Wage the major announcements.