Autumn Budget 2021 – tax rises confirmed to fund big spending

Aside from the price cut for a bottle of Prosecco, the 2021 Autumn Budget will be remembered mainly for confirming a wide range of future tax increases for both businesses and individuals, and unprecedented levels of public spending.

The economic situation + forecasts

• Inflation is expected to rise to 4% during 2022, although the OBR has suggested that the rate could climb as high as 5%.
• Annual economic growth is forecast to reach 6.5% during 2021, and 6% next year.
• The Chancellor expects the economy to return to its pre-COVID size by 2022.
• The Government borrowed £319bn during the 2021-22 year (over 15% of GDP) – the highest ever recorded level during peacetime.
• The national debt is around 98% of GDP. This is forecast to fall to 88% by 2026/27.
• Government departments will receive an additional £150bn during the lifetime of this Parliament. The Chancellor said that this is the highest real-term increase in spending this century.

No contractor-specific mentions

• No mention of IR35.
• No mention of possible regulation of the umbrella company sector.

Corporation Tax hike in April 2023

• The Government’s plans to hike Corporation Tax to 25% from April 2023 onwards remain on track. CT will apply on a tapered basis from 19% to 25% for limited companies’ profits up to £250,000.
• You can read more about this planned tax rise here.

April 2022 tax rises – dividends, National Insurance

The Government’s pre-announced 1.25 percentage point increases to NIC and dividend tax rates from next April will go ahead as planned. You can find out how much the dividend tax rise will cost you here. See the combined effect on your take-home pay by using our April 2022 tax hike calculator.

Personal Allowance frozen

• The Personal Allowance will remain at £12,570 for the 2022/3 tax year.
• The normal minimum pension age will increase from 55 to 57 after April 2028.

Lifetime Pension Allowance frozen

The Lifetime Allowance will remain at £1,073,100 until April 2026.

Inheritance Tax bands frozen

The nil-rate band remains £325,000, with an additional up to £175,000 per person for residential property.

CGT rates frozen – minor change for second home disposals.

• The CGT rates, and the tax-free allowance remains at £12,300 until April 2016.
• If you sell a second home, you will now have 60 rather than 30 days to report any chargeable gains to HMRC.

VAT registration threshold frozen

• The standard rate of VAT remains at 20%.
• The registration threshold remains at £85,000; the deregistration limit remains at £83,000.

ISA contribution limits frozen

• Adults can invest up to £20,000 tax-free in an ISA during 2022/3.
• Junior ISA and Child Trust Fund limits remain at £9,000.

Other noteworthy points from the Budget

• Tax on alcoholic drinks will be simplified, with tax levels linked to the alcoholic content of each type of drink.
• Fuel duty will not be increased. The Government will still benefit from increased VAT receipts generated from the current high prices of fuel.
• The National Living Wage will rise to £9.50 from 2022.
• Various Business Rate measures were announced, including the cancellation of next year’s planned increase to the multiplier.

You can access the official Treasury Budget documents here.