2021 Autumn Budget – brief overview

No big surprises in this year’s autumn budget, given some of the announcements leading up to the budget and the “leaks” of information too.

Below is a brief summary on the key areas of personal and business tax.

Personal tax

Tax rates and allowances for 2022/23

Personal tax rates and the personal allowance remain unchanged

Personal allowance of £12,570

Basic rate limit £37,700

Basic rate, higher rate and additional rate income tax will remain at 20%, 40% and 45%.

The additional income tax rate threshold will remain at £150,000

The capital gains tax (CGT) annual exempt amount will remain at £12,300 – CGT rates are unchanged for 2022/23.

Scotland has its own rates and rate bands, to be set for 2022/23 by the Scottish Parliament at its Budget on 9 December 2021, and the Welsh Parliament could also modify income tax rates for Welsh taxpayers at its Budget on 20 December 2021.

The starting rate for savings limit (applicable throughout the UK) will remain at £5,000 for 2022/23, and the starting rate itself at 0%. The Personal Savings Allowance also remains unchanged.

Inheritance tax thresholds and rates are unchanged, and the nil rate band is fixed until April 2026.

Dividend tax rates

As previously announced, tax on dividends will increase by 1.25% on all three rates for 2022/23 onwards.

The dividend nil rate will remain at £2,000. 

The increase is meant to fund the NHS and social care.

National Insurance contributions rates and thresholds

The Upper Earnings Limit and Upper Profits Limit will be maintained at 2021/22 levels, in line with the higher rate threshold for income tax.

A 1.25% Health and Social Care Levy from 6 April 2023 that had already been announced will be added to the national insurance rates.

Van benefit charge and fuel benefit charges for cars and vans

The van benefit charge will increase to £3,600, the multiplier for the car fuel benefit will increase to £25,300, and the van fuel benefit charge will increase to £688.

ISAs, junior ISAs and child trust funds

The annual subscription limits for ISAs, junior ISAs and child trust funds will remain unchanged for 2022/23 – the limit for ISAs will be £20,000, and the limit for junior ISAs and child trust funds will be £9,000.

Increase in normal minimum pension age

The earliest age at which most individuals can access their pensions without incurring an unauthorised payments tax charge, is to increase from 55 to 57. The increase will have effect from 6 April 2028.

Pensions tax relief administration: top-up for low earners in net pay arrangements

The Government is set to introduce a system to make top-up payments directly to lower earners (those with taxable incomes below the personal allowance) who are saving in pension schemes using a net pay arrangement from 2024/25 onwards. These top-ups will be paid after the end of the relevant tax year, with the first payments being made in 2025/26. 

Business tax

Residential property developer tax

The Government had previously announced a new residential property developer tax as part of its measures to address unsafe cladding on high-rise buildings. It will apply with effect from 1 April 2022 to the relevant profits arising on or after this date of companies undertaking residential property development activities. It was confirmed in the Budget that the tax will be charged at 4% on profits exceeding an annual allowance of £25 million.

Basis period reform

The basis period rules for self-employed individuals and partners are to be reformed. A business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of the accounting date of the business. On transition, all basis periods will be aligned to the tax year and all outstanding overlap relief given.

The rules will come into place from April 2024.

Capital allowances

The increased annual investment allowance (AIA) of £1 million has been extended for a further 15 months to 31 March 2023.

Research and development (R&D)

From April 2023, research and development (R&D) tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. 

Cross-border group relief

Due to Brexit, the existing beneficial cross border group reliefs relating to EEA-resident companies have been repealed for accounting period ending on or after 27 October 2021.

Creative industries

From 27 October 2021, there will be a temporary increase in the rate of theatre tax relief, orchestra tax relief and museums and galleries exhibition tax relief.

Other announcements

  • The national living wage has been increased from £8.91 per hour to £9.50 per hour
  • Businesses in leisure and hospitality and retail will benefit from reduced rates on business rates.
  • Business rates will now be re-evaluated every 3 years instead of 5 years for all businesses.

Please get in touch here, if you have any questions.

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