We’ve worked with a number of our partners to compile this summary of yesterday’s Budget Announcement. In addition to this summary, a full analysis is available here.
Before we delve in, this summary isn’t financial advice and we’d recommend seeking advice before taking action. If you are a client of Emery Little, we’ll be in touch directly with any recommendations and will discuss the implications at your next review meeting. If you have any questions in the meantime, just get in touch.
The central theme of Chancellor Rishi Sunak’s Autumn Budget was greater investment in UK PLC as part of the government’s long term economic plans and priorities. This included £11.5 billion investment in 180,000 new affordable homes, and a Levelling Up Fund that will mean £1.7 billion invested in local areas across the UK.
While some of the announcements may have seemed rather long term, Mr Sunak did provide some more immediate relief for households and businesses still fragile from the effects of the pandemic.
The previously announced freezing of tax allowances and thresholds for income tax and the introduction of the new Health and Social Care Levy are due to raise very large amounts of revenue over the next five years. These, together with the accompanying increase in dividend tax, provide a crucial backdrop to the spending increases and tax changes announced in the Autumn Budget.
In the more immediate future, there was, however, a slight loosening of the rules governing CGT: effective immediately the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
Our full analysis includes a number of points for you to consider however, there are a number of points we want to highlight in relation to your plans. Some of these we’ve highlighted before. Of course, we’ll discuss any implications for your personal plan at your next review meeting.
- There was a warning for asset holders as the Chancellor expects to raise £985m from freezing inheritance tax bands, £990m from freezing the pension lifetime allowance, and an extra £65m from freezing the annual exemption on capital gains tax (CGT) in the next five years. We’ll keep an eye on developments.
- Effective immediately, the deadline for reporting and paying CGT after selling UK residential property will increase from 30 days to 60 days after completion.
- We said this in our update for the last budget but don’t lose your personal allowance. Your personal allowance of £12,570 in 2021/22 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.
- NICs increase from 6 April 2022. Salary sacrifice arrangements, for example for employers rather than employees to make pension contributions, will offer even greater savings in 2022/23.
- Dividend tax rates will rise from 6 April 2022. You could save tax if your company pays you a dividend in the current tax year.
- The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2021/22 and 2022/23 – use it or lose it.
- The lifetime allowance remains frozen at £1,073,100 until April 2026. Regularly review the value of your pension benefits and any ongoing contributions.
- Planned increases to corporation tax from April 2023 provides pension planning opportunities for business owners who are looking to extract money from their business in a tax efficient way.
Other points to discuss down the pub (over a beverage with a low alcohol content)
A 6.6% increase to the national living wage to £9.50 an hour, starting on 1 April 2022, was confirmed. Young people and apprentices will also see increases in the national minimum wage rates.
And, as the country grapples with petrol prices at their highest level for eight years, a planned rise in fuel duty was cancelled again, the 12th time in a row.
In welcome news for drinkers, a fall in tax on their favourite tipple is likely, as long as it’s at the softer end. Reform of the levy on alcoholic drinks will see tax pegged to alcohol content, with higher strengths incurring proportionately more duty. All tax categories (e.g. beer, wine) will move to a standardised set of bands, with reduced rates for products below 3.5% ABV.
Businesses in the retail, hospitality and leisure sectors received particular sympathy from the Chancellor. Still reeling from months of Covid-enforced shut down, they were recognised as needing ongoing support, with a 50% cut in business rates in 2022/23. The business rates multiplier will also be frozen for 2022/23. From 2023, no business will face higher rates bills for 12 months after making eligible improvements to an occupied property.
A new domestic air passenger duty band will cover flights within the UK with a rate of £6.50 for 2023/24. There will be a new ultra-long-haul band, covering destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.
How the Chancellor’s plans play out against a backdrop of potentially rising inflation and no let up in the calls on the public purse should make for a lively run up to the new tax year.
You can read the full analysis here and we’d like to remind you to make sure you get advice before taking action.
If you’d like to discuss any points, please don’t hesitate to get in touch with us.