Autumn budget

Practical accountancy with Allchurch & Co

Firstly, we would like to wish you a very Merry Christmas, and a Happy New Year. It has been another turbulent year for many business’ and we hope that 2022 is going to be a better year for all.

We wanted to highlight some of the key changes announced by the Chancellor in the Autumn Budget, some of the changes were announced in weeks leading up to the budget, however we have summarised some of the recent announcements below.

National Insurance – Health and Social Care Levy

The new Health and Social Care Levy will proceed as previously announced.

The 1.25% Levy will apply across the UK with an increase in Class 1 (Employee, Employer) and Class 4 (Self Employed) National Insurance contributions (NICs), and to the main and additional rates.

The Levy will not apply to Class 2 NICs or Class 3 NICs. The Levy will be introduced from April 2022, when NICs for working age employees, self-employed people and employers will increase by 1.25%.

From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and will also apply to the earnings of individuals working above State Pension age, and NICs rates will return to their 2021/22 levels.

Dividend tax rates

As previously announced, the rates of income tax to be paid on dividend income will increase by 1.25%.

The dividend ordinary rate will be 8.75%, the dividend upper rate will be 33.75% and the dividend additional rate will be 39.35%.

The changes will apply UK-wide and will take effect from 6th April 2022.

Pensions and savings

No changes were announced to the amount of contribution you can make tax-free to a personal pension, with the maximum amount remaining at £40,000 each tax year.

However, the government is temporarily suspending the earnings element of the ‘Triple Lock’ used to uprate the State Pension and Pension Credit. For 2022/23, the basic State Pension, Pension Credit and survivors’ benefits in industrial death benefit will increase by the higher of CPI or 2.5%.

The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2022/23.

The annual subscription limit for Individual Savings Accounts (ISAs) are not being changed in 2022/23 and remain at £20,000 for Adults; and £9,000 for Juniors and users of a Child Trust Fund.

National Living Wage

The National Living Wage (the minimum wage for those aged 23 years and above) will be increased by 6.6%, from £8.91 to £9.50 per hour. Workers aged below 23 years are eligible for the National Minimum Wage, which is also increasing for:

  • 21 to 22-year olds by 9.8% from £8.36 to £9.18 per hour
  • 18 to 20-year olds by 4.1% from £6.56 to £6.83 per hour
  • 16 to 17-year olds by 4.1% from £4.62 to £4.81 per hour
  • Apprentices by 11.9% from £4.30 to £4.81 per hour

The Chancellor made no announcement about other age groups, with under 18-year olds currently entitled to £4.62 per hour and 18 to 20-year-olds receiving £6.56 per hour.

Capital Gains Tax

The Chancellor previously announced the capital gains tax (CGT) annual exempt amount of £12,300 would be frozen until 2026.

Corporation Tax

As previously announced, Corporation Tax will increase from 19% to 25% from April 2023 when a company’s profits are over £250,000. The tax will remain at 19% for profits up to £50,000, with a tapered increase up to the main rate of 25% when profits reach £250,000.

Research & Development (R&D) tax relief

The system of R&D tax relief is being reformed. The government is expanding qualifying expenditure to include data and cloud computing costs and is refocusing the reliefs towards innovation in the UK.

Annual Investment Allowance (AIA)

The government is extending the temporary £1 million level of the Annual Investment Allowance to 31 March 2023. The change is designed to encourage businesses to bring forward investment and make tax simpler for any business investing between £200,000 and £1 million.

Business Recovery Loan Scheme

The Business Recovery Loan Scheme is being extended to 30th June 2022, with finance up to a maximum of £2 million per business available to assist recovery from the impact of the COVID-19 pandemic and to grow. The government guarantee will be reduced from 80% to 70%.

Other reminders

In the autumn budget the government has confirmed the introduction of basis period reform, in order to simplify the income tax position for self-employed tax payers and partnerships. It will change the basis period rules from a current year basis to a fiscal year basis. The transitional year on this basis will be 2023/2024 and then the actual changes themselves would take effect from 2024/2025.

Making tax digital has been postponed but will now commence 6th April 2024.

The new 60-day capital gain reporting pay and file regime (previously 30 days) regarding domestic property.

Reminder that the SEISS government grants are subject to tax and NI.

As always if there is anything you read in this article that you would like to discuss, please get in touch.

Allchurch & Co Chartered Accountants / 01792 439438 / www.allchurch.com / info@allchurch.com

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