Autumn Budget 2021
Rishi Sunak took to the dispatch box to deliver his first autumn budget against a backdrop of rising inflation, soaring energy prices, supply chain failures and very high government borrowing.
His ‘big freeze’ mini-budget in the spring fixed most tax rates and thresholds until 2025 and there were no real changes yesterday in this regard. The spring budget had as its focus the protection of jobs and businesses after the turbulence of 2020 but with the OBR upgrading future growth projections, his spending focus has switched somewhat in favour of infrastructure and public services.
So what were the key announcements in yesterday’s budget?
- Dividend Tax – First announced in September, the rate of dividend tax will rise by 1.25% across the board from April 2022. This means that the rate will be 8.75% for basic-rate taxpayers, 33.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers. The annual dividend allowance – the amount of dividend income you do not have to pay tax on – will remain at £2,000.
- Pensions – No major changes to pensions were announced. What noteworthy announcements there were quite technical. These related to low earners who are in auto-enrolment schemes and some public sector workers who have been switched to an average earnings accrual basis within 14-10 years of retirement. Please contact us if you think you would like more information on these changes.
- National Insurance – Also announced in September, the government has legislated for a new 1.25% Health and Social Care Levy to fund investment in the NHS and social care. The Levy will apply UK wide, to the same population and income as Class 1 (Employee, Employer) and Class 4 (Self Employed) NICs, and to the main and additional rates.
The freezing of thresholds for taxation will have the effect of raising the treasury tax take over the coming years and increases the value of financial advice in ensuring that you don’t overpay tax over the coming years.
The biggest announcements of 2021 largely came in the spring budget. We would encourage you to read our summary here.