Today the Chancellor delivered his Autumn Budget and Spending Review 2021. In his announcement, Rishi Sunak warned of challenging months ahead as the country continues to recover following the Coronavirus pandemic impact and stated that there is work to do to prepare for a post-COVID economy. That said, remained positive that we are entering a new age of optimism.
As expected, there was very little that impacts contractors or the self-employed and most of the headline announcements were leaked in the week leading up to budget. We’ll look into what was announced below.
As already announced earlier in the month, the new health and social care levy will be introduced from 6th April 2022 meaning an increase of 1.25% on dividend tax, National Insurance (both employer’s and employee’s), S455 charge (in line with the higher rate of dividend tax) and Benefit in Kind. As an example, the below rates of dividend tax will apply from 2022/23.
Tax band * | Proposed from 2022-23 | Current rates |
Basic rate | 8.75% | 7.5% |
Higher rate | 33.75% | 32.5% |
Additional rate | 39.35% | 38.1% |
Initially this will be captured as an increase to the rate of NI however from April 2023, NI rates will revert to 21/22 rates and a separate health and social care levy introduced at 1.25%. Everyone will pay the Levy, including those of retirement age.
Prior to the budget, the government announced increases to the national minimum wage that will apply from 1st April 2022. For over 23-s, National Living Wage will be increasing from £8.91 to £9.50 an hour.
There are no changes to the planned increase to the main rate of Corporation Tax as announced in the Spring budget which is set to rise from 19% to 25% in April 2023, for businesses with profits of more than £250,000. Businesses with profits of £50,000 or less, will continue to be taxed at 19% and a tapered rate will also be introduced for profits between £50,000 and £250,000.
The chancellor also announced an extension to the temporary £1 million level of the Annual Investment Allowance to 31 March 2023.
There were no changes to the plans to freeze in the income tax Personal Allowance and higher rate threshold and National Insurance Contributions Upper Earnings Limit and Upper Profits Limit at their 2021/2022 levels.
This means the Personal Allowance will remain at £12,570, the higher rate threshold will remain at £50,270 and the additional rate threshold if fixed at £150,000. The NIC Upper Earnings Limit and Upper Profits Limit will remain at £50,270 for these years.
Despite additional rumours (following similar rumours in March), there were no changes to Capital Gains tax or to the way tax relief is calculated on pension contributions for higher rate taxpayers.
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