Well, that’s the Chancellor’s Autumn Budget wrapped up for another year. With most of the changes affecting the self-employed and small businesses already announced, here's a summary of the key personal tax and business tax issues.
The Chancellor did not announce any significant, additional support for the self-employed or small businesses, with the Budget focusing heavily on stabilising the country’s public finances and ensuring the economy’s recovery from the COVID-19 pandemic. Inflationary pressure remains a threat to economic recovery across the globe, with the rate in the UK expected to average at 4% in 2022.
Previously announced tax changes were confirmed, including the freezing of the annual personal allowance and thresholds, and increases in employment and corporation taxes. The impact of the new IR35 rules on freelancers and the self-employed were not mentioned at all. This is particularly disappointing at a time when the need for small businesses and entrepreneurs to lead the country’s economic recovery is at its highest.
Some measures are of course welcome, including the increase in the National Living Wage and positive changes to Universal Credit.
For business, the changes to Research & Development tax relief rules and reform of business rates are also welcome, with the hospitality sector finding some support through the changes in the regime for alcohol duty.
You can also keep up with all the latest figures by bookmarking our handy self-employment tax rates and important dates article. Otherwise, let's run down the highlights from the Autumn Budget!
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.
You can read more about these changes in our social care article.
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 dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.
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.
Changes were announced to Universal Credit which means low income households can retain more of the income they earn:
- the taper rate in Universal Credit reduced from 63% to 55%, meaning Universal Credit claimants will be able to keep an additional 8p for every £1 of net income they earn
- the amount that households with children or a household member with limited capability for work can earn (known as the ‘Work Allowance’) before Universal Credit begins to reduce is now increased by £500 a year.
Capital Gains Tax
The Chancellor previously announced the capital gains tax (CGT) annual exempt amount of £12,300 would be frozen until 2026. Basic-rate taxpayers will continue to pay 10% on capital gains above this amount, while higher-rate taxpayers pay 20%.
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.
The Chancellor confirmed business rates revaluations will now happen every three years, with the first new revaluation cycle planned for 2023. From 2023, every business will be able to make property improvements and for 12 months, pay no extra rates because of a new ‘business rates improvement relief’. The planned increase in the business rates multiplier in 2022/23 has been cancelled.
The Chancellor also announced a new, temporary 50% business rates discount for businesses in the retail, hospitality and leisure sectors, including pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms. This means, from 2022, any eligible business in these sectors can claim a discount up to a maximum of £110,000.
The government is introducing a new relief to support green technologies which means until 2035, plant and machinery used onsite for renewable energy will be exempt from business rates.
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%.
As in previous budgets, the Chancellor decided there should be no increase in fuel duty.
The alcohol duty regime is being simplified, reducing the number of main rates from 15 to six, and taxing all products in proportion to their alcohol content. The government is also simplifying the way businesses register and pay for duty, ending the practice where individual products have different administrative rules.
Alcohol will be taxed with higher strength products incurring proportionately more duty, and new rates for low strength drinks below 3.5% ABV. The government will also introduce a new small producer relief, for cider makers and other producers of lower ABV drinks. The government will cut duty rates on draught beer and cider by 5%, taking 3p off a pint, with the duty rates on beer, cider, wine and spirits frozen for another year.
Angel investors and start up loans
In a move that might be good news for those across the country trying to get a startup off the ground, angel investors will be made available to businesses outside of London and the South East.
Funding of £150 million from the British Business Bank should encourage the development of regional networks of angel investors, and help boost entrepreneurship.
The government is also providing funding for Start Up Loans to deliver 33,000 loans to entrepreneurs across the UK looking to start or grow their business.
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