The 2021 Autumn Budget was delivered today by The Host, the Chancellor of the Exchequer Rishi Sunak.
This article focuses on announcements which impact private clients, it is not exhaustive and does not provide any detail on business and corporate taxes.
A lot of the Government’s plans, particularly investment in public services and the end of the public sector pay freeze from April have already been announced and it was expected this Budget would be a tug of war between investing in growth, budget cuts and collecting more taxes.
We already know that National Insurance increases have been given the green light and will rise by 1.25% across the board from April 2022, with the additional revenues raised providing much needed additional funding for the NHS and Social Care.
The rates of tax on dividend income will increase by 1.25% too. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate. The changes will apply UK-wide and will take effect from 6 April 2022.
In addition, it’s been announced the state pension triple lock has been given a red light and will be suspended for a year. The triple lock guarantees that the state pension will increase every year by the highest of inflation, earnings growth or 2.5% However the effects of the furlough scheme meant earnings growth was abnormally hight at 8% so that part of the triple lock has been dropped.
The September announcement of the National Insurance and dividend tax increases has meant that today’s Budget was mostly uncontroversial and allowed the Chancellor to avoid any glass stepping stones in his speech.
The Chancellor focused on highlighting areas where spending and investment would be increased to stimulate growth in the economy.
The main issues to bring to the attention of private clients are therefore as follows:
1. Capital gains tax rates have not increased; it had been speculated these might be aligned with income tax rates;
2. Pension savings allowances have not changed, it was feared that higher rate tax relief for pension savings might be removed;
3. There have been no other major changes to income tax rates and allowances announced;
4. There have been no changes announced which impact the Remittance Basis Tax Regime which applies to Non-Domiciled taxpayers;
5. The deadline for residents and non-residents to report and pay Capital Gains Tax after selling UK residential property will increase from 30 days after completion to 60 days. This has effect for all sales completed from 27 October onwards;
6. The basis period reform, which aims to simplify the basis period rules for the self-employed and partners, has been delayed meaning the transition to the new rules will take place in 2023 to 2024 and the new rules will come into force from 6 April 2024.
We might decide now is the time to have a drink and drown our sorrows or even celebrate, thanks to the alcohol duty freeze we shouldn’t see any increase in the price for now. However the Chancellor has announced a consultation to reform alcohol duty which is likely to mean that drinks with a higher alcohol content become more expensive in the future.