Autumn Budget 2021 – Summary for individuals

Chancellor Rishi Sunak delivered his Autumn Budget statement with many tax increases already announced – with eye catching increases to National Insurance from April 2022 to fund the increasing cost of social care and a Corporation Tax increase which takes effect from April 2023.

It was therefore good news that no further major tax increases were announced.

The Chancellor acknowledged that the tax burden is at a historically high level, and that he hopes he can reverse some of the increases or announce other tax cuts – surprisingly which would be before the next election.

We have digested the Budget information and summarised the key points for individuals below:

Personal Allowance – It was previously announced the personal allowance would be frozen at the current level of £12,570 until the end of 2025/2026.  This is the amount an individual can earn before paying Income Tax.

Income Tax rates – Untouched by the Budget.  The basic rate of Income Tax to remain at 20% for the next £37,700 above the Personal Allowance.  The higher rate of tax to remain at 40% above £50,270.  The Additional rate to remain at 45% for income over £150,000.

Dividend tax rates – It was announced in September 2021 that dividend tax rates would increase by 1.25% from April 2022.  The dividend tax rates will therefore increase to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers from April 2022.

National Insurance (NI) – It was announced in September 2021 that the NI rate would increase by 1.25% from April 2022.  Employee Class 1 NI will increase from 12% to 13.25%.  Employers Class 1 NI will increase from 13.8% to 15.05%.

For the self-employed Class 4 NI will increase from 9% to 10.25%.

Scottish Tax rates – Scottish Tax rates differ from the rest of the UK.  Scotland have not yet announced their tax rates for 2022/23.  Current rates are payable at 19%/20%/21%/41%/46%.

Basis period reform – From April 2024 unincorporated businesses with an accounts year end that does not tie in with the tax year, will be taxed on their profits earned on a tax year basis regardless of their accounting period.  The transition year will be 2023/2024 where all basis periods will align to the tax year.

Capital Gains Tax (CGT)– The widely tipped increase to CGT rates did not materialise. CGT will continue to be taxed at a rate for basic rate taxpayers of 10% and higher rate taxpayers of 20%.

It was announced however that the deadline for reporting and paying CGT for UK property disposals will increase from the current 30 day deadline to 60 days for disposals completing on or after 27 October 2021.

Universal Credit – It was announced a reduction in the taper rate in Universal Credit from 63% to 55%.  The reduction will be implemented no later than 1 December 2021.

Fuel Duty – The increase in fuel duty for petrol and diesel is cancelled and instead the duty is frozen in 2022/2023.  This is the 12th consecutive year the duty has been frozen.

Alcohol Duty – Simplification of alcohol duties announced with rates to more closely correlate with a product’s ABV.  In a measure which will support pubs, duty rates on draught beer and cider will be reduced by 5%.

National Minimum Wage (NMW) – it was announced prior to the Budget that the NMW would increase as follows:

Rate from April 2022Current rate Increase
National Living Wage£9.50£8.916.6%
21-22 Year Old Rate£9.18£8.369.8%
18-20 Year Old Rate£6.83£6.564.1%
16-17 Year Old Rate£4.81£4.624.1%
Apprentice Rate£4.81£4.3011.9%

You can download our full budget report here – Autumn Budget 2021.

If you have any questions regarding the Budget and how it impacts on you or your business then please get in touch on 01228 904 904.

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