AUTUMN BUDGET AND SPENDING REVIEW 2021
‘Growth up, jobs up, debt down!’
Yesterday, the Chancellor delivered his latest budget and spending review. Here are the key highlights for owner managers and entrepreneurs.
TAX RELIEF
From April 2023, R&D tax relief to be extending to include more qualifying expenditure (such as date and cloud costs) but claims will be targeted at UK based businesses and innovation.
The temporary Annual Investment Allowance of £1m will be extended to 31 March 2023.
TAX INCREASES
From April 2022, a new Health and Social Care levy of 1.25% will be paid on earnings by everyone paying Class 1 National Insurance contributions (both employer and employee) and to those paying Class 4 National Insurance contributions (paid by the self-employed).
Importantly, this levy will also apply to earnings of individuals working above the State Pension age from April 2023.
The rates of income tax on dividends will increase by 1.25% for all bands as follows:
Ordinary rate – increase from 7.5% to 8.75%
Upper rate – increase from 32.5% to 33.75%
Additional rate – increase from 38.1% to 39.35%
As previously announced, the tax free allowance will remain unchanged and the bandings for higher rates of tax will also remain unchanged.
Tax free allowance £12,570
Basic rate 20% up to £37,500 (so earnings of £50,070)
Higher rate 40% up to £150,000 (loss of tax free allowance above £100,000)
Additional rate 45% above £150,000
Bandings for National Insurance contributions will increase in line with the CPI (being 3.1%).
Corporation Tax rates will remain at 19% for 2022/23. But from 1 April 2023, the main rate will increase to 25% for profits above £250,000. For profits above £50,000 but below £250,000, the rate will also be 25% reduced by a marginal relief. Profits up to £50,000 will continue to be charged at 19%.
TAX ADMINISTRATION
Making Tax Digital (MTD) for Income Tax Self-Assessment is now delayed until April 2024.
No changes announced in relation to off-payroll (IR35) rules.
