The Chancellor presented his Autumn Budget and Spending Review on 27 October 2021. Some of the highlights are discussed below.
Income tax rates and thresholds
The rates and thresholds applying for 2022/23 were confirmed.
As previously announced, the personal allowance remains at £12,570 for 2022/23. The allowance is reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that where income exceeds £125,140, the personal allowance is lost in its entirety.
Rates and bands
The basic rate remains at 20%, the higher rate remains at 40% and the additional rate remains at 45%.
The basic rate band remains at £37,700. This means that where a person receives the standard personal allowance of £12,570, they will start to pay higher rate tax of 40% once their income exceeds £50,270.
The additional rate of 45% is payable on taxable income in excess of £150,000.
The rates applying to the non-dividend, non-savings income of Scottish taxpayers will be announced at the time of the Scottish Budget in December.
Dividend tax rates
As previously announced, the rates at which dividends are taxed are to rise by 1.25% from 6 April 2022. The increase will provide funding for health and adult social care.
Consequently, for 2022/23, the ordinary dividend rate is 8.75%, the upper dividend rate is 33.75% and the additional dividend rate is 39.35%.
National Insurance rates and thresholds
The rates and thresholds applying for 2022/23 have been confirmed.
Employees and employers
As previously announced, the upper earnings limit for primary Class 1 purposes will remain at £967 per week for 2022/23. This is aligned with the point at which higher rate tax becomes payable. The upper secondary thresholds that are linked to the upper earnings limit, namely, the upper secondary threshold for employees under the age of 21, the apprentice upper secondary threshold and the upper secondary threshold for armed forces veterans in the first year of their first civilian employment since leaving the armed forces, also remain at £967 per week.
A new secondary threshold for new Freeport employees is introduced from 6 April 2022. This is set at £481 per week.
The remaining thresholds are increased in line with the increase in the Consumer Price Index. The effect of this is that the lower earnings limit is set at £123 per week for 2022/23, the primary threshold is set at £190 per week and the secondary threshold is set at £175 per week.
As previously announced, the rates of primary and secondary Class 1, Class 1A and Class 1B contributions are increased by 1.25% for 2022/23 only pending the introduction of the Health and Social Care Levy. The main primary rate is 13.25% and the additional primary rate is 3.25%. Employers will pay secondary Class 1, Class 1A and Class 1B contributions at 15.05%. The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.
The Employment Allowance remains at £4,000 for 2022/23.
The self-employed pay Class 2 and Class 4 contributions.
Class 2 contributions are weekly contributions payable where profits exceed the small profits threshold. For 2022/23, the small profits threshold is £6,725 and the Class 2 contribution rate is £3.15 per week.
The self-employed also pay Class 4 contributions on their profits. The upper profits limit (which is aligned with the upper earnings limit for Class 1 and the rate at which higher rate tax becomes payable) is frozen at £50,270, while the lower profits limit is increased to £9,880.
Pending the introduction of the Health and Social Care Levy, the Class 4 rates are increased by 1.25% for 2022/23. As a result, the main Class 4 rate is set at 10.25% and the additional Class 4 rate is set at 3.25%. The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.
Cars and vans
The rates of company car tax already announced for 2022/23 will continue to apply for 2023/24 and 2024/25.
The fuel scale multiplier used for working out the fuel benefit charge is set at £25,300 for 2022/23 (up from £24,600 for 2021/22).
The amount on which tax is charged in respect of a taxable company van is increased to £3,600 for 2022/23. The amount is £3,500 for 2021/22.
A separate fuel charge applies where fuel is provided for private journeys in a company van. This is set at £688 for 2022/23 (up from £669 for 2021/22).
Residential capital gains tax
Where a residence has not been your only or main residence throughout the time that you have owned it, you may have to pay capital gains tax if the chargeable gain is more than your annual exempt amount. This may be the case if you sell an investment property or a second home.
From 27 October 2021, the window for reporting a residential capital gain and making a payment on account of the tax that is due is increased from 30 days to 60 days.
The Chancellor also announced a welcome freezing of certain duties that had been expected to rise.
Fuel duty rates are to remain frozen for 2022/2023.
Alcohol duty rates will remain at their current levels. However, change is on the cards.
The Government are consulting on reforms to alcohol duty which will reduce the number of rates from 15 to six, and which will see higher duty charged on stronger drinks. The consultation will run until 30 January 2022.
Air passenger duty
A new lower band of air passenger duty (APD) is being introduced from 1 April 2023 for flights within the UK. In addition, a new ultra long-haul band will apply to destinations with capitals more than 5,500 miles from London.
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