While many of us were poised for big news about tax increases to cover pandemic spending, the Autumn Budget was not as dramatic as anticipated.
Here’s a round up of the most important points for UK taxpayers and small business owners.
1. The National Living Wage (NLW) is increasing
From 01 April 2022 the NLW will increase to £9.50 per hour for employees aged 23 or over.
2. No change to rates of income tax
The basic rate of income tax will remain at 20% for income over £12,570 and higher rate tax stays at 40% above £50,270. The 45% additional rate will continue to apply to income over £150,000.
These rates will be frozen until 2025/26.
Something to note here is that the freezing of the thresholds may mean that if your income keeps pace with inflation, you may move into a higher tax band and pay tax at a higher marginal rate.
3. No change to Pension Tax Relief
The annual limit for pension input stays at £40,000 – both for individual and employer contributions.
The lifetime pension allowance remains at £1,073,100. This is the maximum total value of your pensions to enjoy tax-free benefits. If you exceed this amount you may need to pay a tax charge.
Note too, that the National Minimum Pension Age will move from 55 to 57 from 6 April 2028. This will affect you if you were born on or after 6 April 1973.
4. Increase to National Insurance
Touted as a measure to support the NHS and social care, from 06 April 2022 employees and the self-employed will start paying National Insurance Contributions on earnings over £9,880 at the following rates:-
Employees 13.25%
Self-employed 10.25%
The Upper Limit is frozen in line with the income tax higher rate threshold. The new 3.25% rate will apply to earnings or self-employed profits above £50,270.
Employer contributions at 15.05% will apply to earnings above £9,100 a year for 2022/23.
4. New Dividend Income Tax rates
From 06 April 2022 the first £2,000 of dividend income will remain tax-free. Beyond that, new dividend tax rates will apply as follows:-
Basic Rate Tax Payer: 8.75%
Higher Rate Tax Payer: 33.75%
Additional Rate Tax Payer: 39.35%
This increase is a way of making sure that people in small businesses who pay themselves a low salary and minimal national insurance, still contribute to the aforementioned health and social care levy.
5. Changes to Business Rates
Rishi Sunak announced a 50% discount on business rates up to a limit of £110,000 for the retail, hospitality and leisure sectors.
He also proposed an Online Sales Tax to balance out the advantage that online retailers have over their counterparts on the high street. Further details on this will be confirmed at a later date.
6. More time to pay Capital Gains Tax
From October 2021, property owners now have 60 days to report and pay any capital gains tax due when selling residential property.
With Business Asset Disposal Relief there remains a 10% rate of Capital Gains Tax on the first £1 million of lifetime gains.
7. Recovery loan scheme
The recovery loan scheme, originally due to end on 31 December 2021, has been extended by six months to 30 June 2022.
If you need funding to help you recover from the impact of the pandemic, this may help.
Need a bit more clarity about what the Budget means for you as an individual or as a small business owner? Just get in touch. As small business accountants in the Lune Valley, we provide tax advice, payroll services and much more. Contact us.