Autumn Budget 2021
Written by Ray Coman
Light on change but only about 7 weeks after announcement of the Health and social care levy, the Budget acted mainly as recap on regulation scheduled for the Finance Bill 2021/22. Rishi Sunnak’s third Budget made further pledges to increase spending on the NHS.
Increase in rate on dividend tax
Annual Investment Allowance up
Residential Property Developer Tax
Capital Gains tax reporting time limits to be extended
Promoters of Tax Avoidance to be more heavily punished
Benefit-in-kind taxation to increase for vehicles
NIC to rise in line with inflation
Increase in rate on dividend tax
As announced on 7 September, the rate of tax on dividend income will increase by 1.25% from 2021/22. Consequently the ordinary rate will be 8.75%, the upper rate 33.75% and the additional rate 39.35%.
Advancement in retirement age
From 6 April 2028, the normal pension age is set to increase from 55 to 57. This will affect the earliest date on which pension benefits can be drawn.
Annual Investment Allowance up
The Finance Bill 2021/22 will legislate for the temporary increase in Annual Investment Allowance to £1,000,000 to extend until 5 April 2023.
Residential Property Developer Tax
As stated by the government in February 2021, a surcharge of 4% will be levied on corporation tax profits from property development companies. However this will only apply to profits above an annual allowance of £25 million.
Capital Gains tax reporting time limits to be extended
For both UK and non-UK residents, the time limits for reporting on the disposal on UK property will increase from 30 days to 60 days. This will take effect for disposal completion as from today.
The payment deadline will also increase to 60 days, but for residential property disposals only.
Promoters of Tax Avoidance to be more heavily punished
Further enforcement measures are introduced to penalize promoters of tax avoidance. Thee include the freezing of any promoter’s assets.
Benefit-in-kind taxation to increase for vehicles
From 2022/23, the van benefit charge will increase to £3,600 and the multiplier used in calculating the car benefit will increase to £25,300. The van fuel benefit charge will also increase to £688. This will increase the tax burden on companies providing vehicles to employees and directors as a perk.
NIC to rise in line with inflation
National Insurance thresholds will increase in line with Consumer Price Index (or CPI) which at the time of writing is measured at 3.1%. Nonetheless, the upper profits limit (for self—employed) and upper earning limit (for employed individuals) will remain at current levels through 2021/22.
Health and Social Care Levy
As previously announced on 7 September, the government will increase funding in the NHS through an increase in national insurance. The increase is 1.25% and will take effect from 6 April 2022. The levy will not apply to Class 2 and Class 3 NICs, which are flat rate.
The amount of tax for all working age employed individuals and self-employed people will go up by 1.25% with income above the earnings threshold and lower profits limit. The levy therefore applies to the main rate by increasing it to 10.25% for self-employed individuals, to 13.25% for employees and to 15.05% for employers. The additional rate for all working age individuals will increase to 3.25%.
From April 2023, the levy will also apply to people who are working over the state pension age. However, pension income itself will not remain subject to the H&SC levy and therefore the burden of extra tax will weigh predominantly on the working population.
Introduction of MTD delayed
The start date Making Tax Digital (MTD) as it applies to Tax Returns has been postponed to April 2024. The Income Tax Self-Assessment (ITSA) will oblige sole traders and landlords with an income of over £10,000 to file five reports to HMRC each year. The date will be mandatory for partnership one year later in April 2025.
Other changes
Isas limit of £20,000 and junior ISA limit of £9,000 will remain unchanged in 2022/23
Fuel duty frozen amid rising petrol prices
