The first Autumn Budget since 2018, and Chancellor Rishi Sunak’s third Budget in fewer than 20 months, focuses mainly on public spending.
It reveals no major increases in personal taxes, but no major reductions, either.
Another Budget earlier in the year addressed how to raise necessary extra revenue, including corporation tax rises and allowance freezes.
Here are the highlights from the Autumn Budget 2021:
- Income Tax and Dividend Tax
The personal allowance and income tax rates for 2022-2023 will remain frozen at the same levels as 2021-2022, but the Married Couple’s Allowance and Blind Person’s Allowance will increase. Tax for dividends above the frozen allowance of £2,000 will be increasing by 1.25% in each tax rate band.
- National Insurance Contributions and the Health and Social Care Levy
As announced back in September, National Insurance Contributions will also increase by 1.25% from April 2022. This applies for Class 1 (employee), Class 2 (Employer), and Class 4 (Self-Employed) NIC. From April 2023, this 1.25% will be legislated as the Health and Social Care Levy to help fund the NHS and social care, and NIC will return to 2021-2022 rates while the Levy is paid separately. The 2023 Levy won’t apply to Class 2 or Class 3 (Voluntary) NIC, but includes workers above State Pension age.
- Inheritance Tax and Capital Gains Tax
No changes for Inheritance Tax, and only an administrative adjustment for Capital Gains Tax. From 27th October 2021, the deadline for reporting and paying CGT after selling a property in the UK will increase from 30 to 60 days. The Chancellor may have abandoned plans for CGT reform for now.
- State Pension and Pension Tax Relief
The government will temporarily suspend the ‘Triple Lock’ uprating system for 2022-2023, so both new and old State Pensions will increase in line with the Consumer Prices Index (to a maximum of 2.5%). Despite fears of negative changes to Pension Tax Relief, there will potentially be an increase for low earners from 2024, with a new top-up payment system due to be introduced in 2025-2026.
- Individual Savings Account Contributions
The Individual Savings Account (ISA) annual limit will remain at £20,000 for adults for another year, as set back in 2017. For Junior ISAs and Child Trust Funds, the annual limit will remain at £9,000.
- Vehicle Excise Duty and Fuel Duty
Vehicle Excise Duty (VED) will be uprated in line with the Consumer Prices Index for cars, vans, and motorcycles. To support the struggling haulage sector, the freeze on VED for heavy goods vehicles (HGVs) will continue, with the HGV Levy suspension extended for another year from August 2022. The Fuel Duty freeze will also continue for the twelfth consecutive year due to rising pump prices.
Though the Chancellor specified in his Budget speech that reducing taxes is a future goal, this will not happen in 2022. We’ll have to wait until next year’s budget for progress on this front.
As 2021 is drawing to a close, it’s the ideal time to start taking care of your year-end tax plans. If you would benefit from tax consultancy services to help with this, contact GBAC today.