On 27th October 2021, the chancellor, Rishi Sunak, delivered the Autumn Budget 2021. He made a number of key announcements including alterations to the current levels of property and corporation tax, also duties on alcohol & airline passenger duty (APD). There were further important announcements concerning business rates, the national minimum living wage, and personal allowances.
So, how does this actually affect us all? Let’s look at the key changes by item;-
CORPORATION TAX
The main rate of corporation tax will remain at 19% until April 2023, when the main rate will increase to 25%, with a Small Profits Rate of 19% for profits not exceeding £50,000.
There will be marginal relief for profits between £50,000 and £250,000 (these thresholds are proportionately reduced for the number of associated companies and short periods). Close investment holding companies, including most family investment companies, will not qualify for the 19% rate.
DIVIDEND TAX
From 6 April 2022, the dividend tax rates will also be increased by 1.25%. The basic rate dividend tax will increase to 8.75%, the higher rate dividend tax will increase to 33.75% and the additional rate dividend tax will increase to 39.35%. Interestingly there are no increases or changes to the main or savings income tax rates.
NATIONAL INSURANCE
National Insurance Contributions (NIC) – the previously announced 1.25 percentage point increase (to fund social care prior to the introduction of the separate Health and Social Care Levy) becomes effective from 6 April 2022.
INCOME TAX AND PERSONAL ALLOWANCES
Income Tax rates have been kept stable, however, the true impact on the taxation of individuals flows from the previous announcements below. — The personal allowance, basic rate and higher rate limits have been frozen at £12,570, £37,700 and £150,000 respectively until April 2026.
BUSINESS RATES
The current system is to be retained but with some key reforms (from 1 April 2023) including increasing the frequency of revaluations to 3 years and introducing new reliefs for investment in property improvements and green technology.
A new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022/23 was announced with a 50% discount for these sectors (capped at £110k per business).
CAPITAL GAINS TAX
Following the sale of UK residential property Individuals disposing of UK property on or after 27 October 2021 now have a 60 day CGT reporting and payment deadline, following the completion of the disposal.
NATIONAL MINIMUM WAGE
Employees aged 23 years and over will be entitled to £9.50 per hour for pay periods starting from 1 April 2022. For 21 to 22 year olds: from £8.36 to £9.18 per hour, 18 to 20 year olds: from £6.56 to £6.83 per hour, 16 to 17 year olds: from £4.62 to £4.81 per hour and Apprentices: from £4.30 to £4.81 per hour.
MAKING TAX DIGITAL
Regarding changes to the “MTD” (Making Tax Digital) for Income Tax Self-Assessment, this has been delayed until April 2024, however, all VAT registered companies – regardless of whether they meet or exceed the VAT minimum threshold will still need to be compliant by April 2022.
ALCHOHOL TAX
An overhaul of the current alcohol taxation system was announced where drinks will be taxed based on their strength, not their category. This means stronger drinks like high-strength ciders and fortified wine will be more expensive, but some lower alcohol drinks will become cheaper.
Tax on sparkling wine will be reduced to bring it in line with still wine, duty rates on draught beer and cider will be cut by 5%, to take effect from February 2023.
AIR PASSENGER DUTY
The changes to duty on air travel will see domestic flights will cost less, whilst Long-haul flights will be more expensive from April 2023, as a new ‘ultra-long-haul’ band of air passenger duty (APD) is introduced. Domestic UK flights will become cheaper when a 50% APD cut is implemented that same month.
FUEL DUTY
The freeze on fuel duty means tax on petrol and diesel will remain at 57.95p per litre until at least 2023.
UNIVERSAL CREDIT
The government has cut the rate at which you lose benefits for each £1 you earn above £515 a month – from 63p to 55p. This taper cut should happen ‘within weeks’, according to Mr Sunak and/or by 1 December 2021.