On Wednesday 27th October 2021, the Chancellor announced his Budget – salient points include the following:-

Capital Gains Tax payment deadline on property disposals extended from 30 days to 60 days

The payment deadline extends from 30 days to 60 days for making Capital Gains Tax (CGT) returns and associated payments on account when disposing of UK land and property and is effective for disposals that complete on or after 27 October 2021.

There is also clarification that, for UK residents only, where a gain arises in relation to a mixed-use property that only the portion of the gain that is the residential property gain is to be reported and paid.

Confirmation of the previously announced increase to the rate of income tax applicable to dividend income in line with the health and social care levy

This measure increases the rate of income tax applicable to dividend income by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%.

The changes will apply UK-wide and will take effect from 6 April 2022.

Annual Investment Allowance (AIA)

The Annual Investment Allowance (AIA) limit of £1,000,000 for qualifying expenditure on plant and machinery has been extended to cover purchases made during the period from 1 January 2022 to 31 March 2023. The limit was originally set to return to £200,000 from 1 January 2022.

Basis period reform

The government has confirmed the introduction of basis period reform to “simplify” the system for taxing self-employed people and business partnerships.

The change, which will apply from 2024/25 with a transition year in 2023/24, will change the way profits are calculated for a tax year. This will now be based on the profits arising in the tax year itself, rather than on the profits of a 12-month set of accounts ending in the tax year.

This means that if you’re s sole trader/partnership, your accounts year end will become 31st March or 5th April (irrespective of what it’s currently set at).

The Government say the simplification will significantly reduce the burden of calculating overlap taxation and relief, and remove the tax deferral advantage possible under the old rules. Trading income will now be taxed on the same basis as property and investment income, creating a more consistent and aligned system that will greatly reduce the opportunity for error and confusion for businesses.

It will, however, mean that during that transitional year businesses who use a non-tax year accounting period will face a significant increase in their tax bill.

 

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