Autumn Budget 2021 – A summary

In this article, we summarise the key changes and highlights from the Autumn budget.

The Scotland Budget will take place on 9 December when we can expect to hear of any changes to the rates and bands for Scottish taxpayers. The Scottish rates of tax only apply to non-savings income. So, they will continue to pay tax on savings and dividend income in line with the rest of the UK.

Income Tax 2022-23 to 2025-26

Dividends– It was confirmed that the rate of tax on dividend income will increase by 1.25%. The rates that will apply in all regions of the UK from 6 April 2022:

  • Dividends that form part of the basic rate band –8.75% (7.5% 2021-22)
  • Dividends that form part of the higher rate band –33.75% (32.5% 2021-22)
  • Dividends that form part of the additional rate band –39.35% (38.1% 2021-22)

Allowances and thresholds– The personal allowance will remain frozen at £12,570 with the basic rate and also remain frozen at £37,700, meaning that the higher rate tax threshold remains at £50,270. The personal allowance and higher rate threshold will remain fixed until 2025/26.

The marriage allowance– permits certain couples, where neither party pays tax in the tax year at a rate other than the basic rate, to transfer £1,260 of their personal allowance to their spouse or civil partner.

Pensions and Savings

Pension top-ups– Low earners, earning less than their personal allowance, can miss out on tax relief if they are members of schemes where employee contributions are collected from gross pay before tax. HMRC will identify these individuals, and each will become entitled to a top-up from 2025/26, averaging £53 a year.

Pension tax relief– There were no changes to pension tax relief in the Chancellor’s Budget.

ISA Investment Limits-The limits set for 2022-23 will remain at:

  • Adult ISAs the limit remains at £20,000
  • Junior ISA limit remains at £9,000
  • Child Trust Funds remain unchanged at £9,000

Lifetime allowance for pension pots (LTA)– From April 2021 to April 2026 the pension lifetime allowance will remain frozen at £1,073,100.

State Pension to rise by 3.1%– The state pension will rise by 3.1% in the 2022-23 tax year, equating to an annual boost of £289 for some pensioners. The Chancellor’s Budget confirmed, for this year only, the increase will not be determined by the usual ‘triple lock’ guarantee, to avoid a ‘disproportionately inflated rise’.

The Chancellor also announced a consultation of the current charge cap of 0.75% on defined contribution auto-enrolment pension schemes.

Meanwhile, the core pension tax-relief system and rules for inheriting pensions have been left unchanged, despite considerable speculation that the government would make these arrangements less generous.

Increasing to the Normal Minimum Pension Age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Capital Gains Tax

  • Capping the annual exempt amount–this will remain frozen at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and to £6,150 for trustees of most settlement.
  • The deadline for reporting chargeable residential property sales– not a main residence, this covers sales of second homes or buy-to-let properties –is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021and is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Inheritance tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

Both the nil-rate band and residence nil rate will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

Corporation Tax (CT)

No change in Corporation Tax rates until April 2023.

For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

  • Taxable profits up to £50,000 will continue to be taxed at 19%
  • Taxable profits more than £250,000 will be taxed at 25%
  • Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

National Insurance Contributions (NIC)

The Budget confirmed that a 1.25% increase in certain National Insurance Contributions for 2022/23 employees, employers and the self-employed to provide funding for health and social care. From April 2023, this NIC increase helps to pay the reforms to social care. It’s intended that the 1.25% rise will become a separate standalone levy from 2023/24.