Autumn Budget 2021 - what it means for you and your clients
27 October 2021
With the majority of tax rates and bands for 2022/23 already announced in the Spring Budget, the Chancellor’s focus turned to away from further tax raising measures and on to spending to boost economic growth.
Read our summary of the key points from today's Budget and a reminder of the announcements in the March Budget.
Pensions and savings
- Pension top-ups for low earners - Low earners with earning less than their personal allowance can miss out on tax relief if they are members of schemes where employee contributions are collected from gross pay before tax. HMRC will identify these individuals and each will become entitled to a top-up from 2025/26, averaging £53 a year.
- Pension tax relief - There were no changes to pension tax relief in the Chancellor’s Budget.
- ISAs - The 2022/23 annual subscription limits for adult and junior ISAs will remain at £20,000 and £9,000 respectively.
Lifetime allowance (LTA) - frozen at £1,073,100. There will be no inflationary increases to the LTA; it will remain at its current level until April 2026.
State Pension ‘triple lock’ - In recent years, State Pensions have been uprated each year by the higher of CPI, 2.5% and the average increase in earnings (known as the ‘triple lock’). However, for tax year 2022/23, the earnings element has been suspended. This means that, in 2022/23, State Pensions will increase by 3.1% (the September CPI figure).
Income tax
- Dividends - It was confirmed that the rate of tax for dividends will increase by 1.25%. This will mean the new dividends rates for individuals will be 8.75% (basic), 33.75% (higher) and 39.35% (additional). The rate for trustees will be 39.35% on amounts in excess of the trust’s standard rate band.
- Allowances and thresholds - The personal allowance will remain frozen at £12,570 with the basic rate band also remaining frozen at £37,700, meaning that the higher rate tax threshold remains at £50,270. The personal allowance and higher rate threshold will remain fixed until 2025/26.
- Scotland - The Scottish Budget will take place on 9 December when we can expect to hear of any changes to the rates and bands for Scottish taxpayers. Of course, the Scottish rates of tax only apply to non-savings income. So Scottish will continue to pay tax on savings and dividend income in line with the rest of the UK.
- Wales - Income tax rates, bands and allowances for Welsh taxpayers remain fully aligned with the rest of the UK.
Capital Gains Tax
- No further changes announced.
The annual exempt amount will remain frozen at £12,300 for individuals (and personal representatives) and to £6,150 for trustees of settlements, until 2025/26.
Inheritance tax
- No further changes announced.
Both the nil rate band and residence nil rate band will remain fixed at £325,000 and £175,000 respectively until April 2026.
Corporation tax
- No further changes announced.
Corporation tax is set to rise to 25% from April 2023. However, small companies with profits below £50,000 will continue to pay at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000 so that they pay less than the main rate.
National insurance
The Budget confirmed that an extra 1.25% will be added to the rates of National Insurance for 2022/23 for employees, employers and the self-employed to help pay the reforms to social care. It's intended that the 1.25% rise will become a separate standalone levy from 2023/24.
Issued by a member of abrdn group, which comprises abrdn plc and its subsidiaries.
Any links to websites, other than those belonging to the abrdn group, are provided for general information purposes only. We accept no responsibility for the content of these websites, nor do we guarantee their availability.
Any reference to legislation and tax is based on abrdn’s understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.
This website describes products and services provided by subsidiaries of abrdn group.
Full product and service provider details are described on the legal information.
abrdn plc is registered in Scotland (SC286832) at 1 George Street, Edinburgh, EH2 2LL
Standard Life Savings Limited is registered in Scotland (SC180203) at 1 George Street, Edinburgh, EH2 2LL.
Standard Life Savings Limited is authorised and regulated by the Financial Conduct Authority.
© 2024 abrdn plc. All rights reserved.