Chancellor Rishi Sunak used the Autumn Budget 2021 to outline the government’s plans for post pandemic, post Brexit Britain.  Investing taxpayer money in long-term plans will, he believes, secure the economic future of the country. Everything from the NHS, schools, local transport and the culture and leisure sector appear set to benefit from the better-than-expected economic outlook from the Office for Budget Responsibility.

But immediate changes to improve the finances of households and businesses increasingly worried about rising costs over the next 12 months were thin on the ground.

 Some of the highlights were:

• A warning for asset holders as the Chancellor expects to raise £985m from freezing inheritance tax bands, £990m from freezing the pension lifetime allowance, and an extra £65m from freezing the annual exemption on capital gains tax (CGT) in the next five years.
• Effective immediately, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
• Retail, hospitality and leisure will be eligible for a temporary £1.7 billion of business rates relief next year. The business rates multiplier will be frozen for 2022/23 so bills are 3% lower than without the freeze. From 2023, no business will face higher rates bills for 12 months after making qualifying improvements to an occupied property.
• A 6.6% increase to the national living wage to £9.50 an hour, from 1 April 2022, was confirmed. Young people and apprentices will also see increases in the national minimum wage rates.
• Alcohol duty will be restructured so that all beverages will be taxed in direct proportion to their alcohol content.
• A new domestic air passenger duty band will cover flights within the UK with a rate of £6.50 for 2023/24. There will be a new ultra-long-haul band, covering destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.
• The temporary £1 million level of the annual investment allowance will be extended to
  31 March 2023.

Click here to view our detailed budget summary.
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If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the Budget, please call us to discuss them.

HMRC says many teenagers are missing out on their Child Trust Funds (CTFs), urging parents to check for hidden cash and forgotten accounts.

The first CTFs matured just over a year ago, at the start of September 2020. CTFs will continue to mature until January 2029 as their owners reach the magic age of 18. At present, about 55,000 CTFs mature every month.
HMRC has been looking at the CTFs that have already matured. Its interest is more than academic because over the life of the scheme, HMRC set up one million CTFs – about 15% of the total. HMRC took the CTF establishment role when parents or guardians had failed to do so within 12 months of receiving a CTF government voucher. HMRC randomly allocated an approved CTF provider to each such orphan.
In a recent press release, HMRC said “Hundreds of thousands of accounts have been claimed so far, but many have not”. Annoyingly – and perhaps deliberately – HMRC does not spell out specific numbers of non-claimants, but said if only 10% miss the date, that amounts to over 5,000 a month.
It should come as no surprise that many parents, guardians and children have forgotten that a CTF exists. To judge by data issued earlier this year, over 80% of CTFs are worth less than £2,500, with many probably only valued in the hundreds, having received no more than one voucher of £250 or £500 before government payments ceased.
If you want to find a ‘lost’ CTF, the best starting point is HMRC’s online tool (see https://www.gov.uk/child-trust-funds/find-a-child-trust-fund). To use this, you will need to create a Government Gateway user ID and password if you do not already have one.
CTFs that carry on beyond their owner’s 18th birthday continue to offer the same tax benefits as ISAs – no UK tax on income or capital gains. However, the underlying investments may be unattractive – deposits with minimal interest rates, for example. The same investment drawbacks can apply long before maturity, so it is worth reviewing any existing CTFs. A transfer to a Junior ISA (JISA) could be a better option than carrying on with a CTF. 

The amount of inheritance tax (IHT) collected by HMRC over the past year reached a record £6 billion, some £1 billion more than the previous 12 months. This increase comes as no surprise given booming property values and frozen nil rate tax bands. It seems the tax is no longer the preserve of the super-rich.

The IHT nil rate band has not been uprated for 12 years and is set to remain at £325,000 for another four. For a reasonably well-off couple, the loss of indexing means around an additional £200,000 of assets being subject to tax. The residence nil rate band (RNRB) is also fixed, at £175,000, until 2026.

Property
Although the nil rate bands total £1 million for a couple, the average value of a terraced house in London, for example, is now over £700,000. Unfortunately, there may be little scope for any IHT planning if the value of your estate comes mainly from your property. However, it is important to have an up-to-date will, and to make the best use of reliefs and exemptions – especially the RNRB.
You might wish to take out life assurance if you want your heirs to hold on to your home, rather than being forced to sell to fund IHT. The policy should be written in trust and increase in line with property values.

Planning
Any IHT planning will depend on your age, assets and how much you can afford to gift without impacting your lifestyle. Professional advice is always recommended, but there are some important considerations:

• Pensions: There are various possibilities, but, for example, you could fund pension contributions for your children or grandchildren. The recipient can benefit from tax relief, and your estate is reduced over time without the need for a large capital gift.
• Business property relief: Riskier, and there is no guarantee of future exemption, but you might consider ISAs that are invested in the AIM market. The ISAs will escape IHT after being held for two years.

HMRC’s basic guide to how IHT works, including details of various exemptions, can be found here.

In recognition of the challenges to many businesses due to the pandemic, the government has delayed the introduction of Making Tax Digital (MTD) for income tax self-assessment (ITSA) by a further year.
MTD will not be mandatory for self-employed individuals and landlords until accounting periods commencing on or after 6 April 2024. The start date for general partnerships (those with only individuals as partners) will now be from April 2025, with the date for other types of partnerships still to be confirmed. The planned April 2026 commencement date for MTD for corporation tax now also seems uncertain.

Knock-on effect
The one-year delay means that:

• The reform of the basis period rules for unincorporated businesses has been pushed back until at least April 2024, with the transition year no earlier than 2023 – so yet another change that now appears less certain than previously.
• The new penalties for late payments and late submissions will now no longer apply to the self-employed and landlords (mandated to use MTD for ITSA) until April 2024, with other ITSA taxpayers included a year later.

No change
Although the delay will be welcomed by the majority of businesses, a delay is all it is. There is no change to the entry point (taxable turnover from self-employment and/or income from property over £10,000), nor to the requirement to keep digital records and provide quarterly returns using third-party software to HMRC.
HMRC has estimated the average transitional cost of becoming digital as £330, with an annual cost of £35 per business, although that assumes no new hardware will be required.
The delay will mean that more software packages are available before MTD for ITSA comes in, and there will be more opportunity to join the pilot scheme. If you are self-employed or a landlord, you should make the most of the extra time to ensure your business is ready come April 2024.