The Autumn Budget, along with the Spring Budget and the ‘mini budget’ of the dividend tax and National Insurance increases, a precursor to the social care levy, we now know what the next little while looks like in relation to financial planning.

There were no surprises in relation to Capital Gains Tax (CGT), Pensions (and tax relief) and Inheritance Tax (IHT) so little to be frantically addressing changes today….

Chancellor Sunak finished off with the changes to Universal Credit, which is welcomed by low earners.

There were increases to the minimum wage, cuts to the Universal Credit taper and “Pubsidies”.

For businesses, as long as you aren’t a bank, you benefit from an extension to Corporation Tax Allowance, short term cuts in business rates and continued support for the leisure sectors.

If you add in the Research and Development (R&D) reliefs and the opportunity to work on the infrastructure projects, tax payers’ money is still being pumped in.

Inflation was a focused topic but none of the measures do anything to control inflation – although Chancellor Sunak confirmed that he had written to the Governor of the Bank of England (Andrew Bailey) to express his views.

A Budget for recovery

In Rishi Sunak’s Budget today we saw him focus on the post covid economy, with a priority on high skills and high productivity. Recovery from the depths of the pandemic is faster than expected with economic growth (GDP) for this year revised upwards to 6.5% from 4% and unemployment lower than expected. The Office of Budget Responsibility expects the economy to return to pre Covid levels at the turn of the year. The levelling up agenda is a ‘golden thread’ running through this year’s budget with, what appears to be on the face of it, significant spending promises. However, there were few announcements on pensions and investments.

What we already knew:

A 1.25% increase to National Insurance and Dividend rates were announced in September this year as part of a series of measures to fund the cost of social care and the NHS. Taxpayers will see this increase from 6 April 2022.

Income Tax

Income tax rates and allowances are unchanged.  This is in-line with the announcement in March 2021 that the annual allowance and basic rate threshold would remain frozen until April 2026. A breakdown of the rates and allowances are provided in the table below.

Capital Gains Tax

•  The annual exempt amount on Capital Gains remains unchanged at £12,300 for individuals, personal representatives and some types of trusts and £6,150 for most trusts. This will remain frozen until April 2026
• Property payment window – With immediate effect the time limit for reporting gains and paying tax on residential property gains will increase from 30 to 60 days

Inheritance Tax (IHT)

This remains unchanged.  It was announced in March 2021 that the Nil Rate Band (NRB) and Residence NRB both would remain frozen until April 2026 at £325,000 and £175,000 respectively.  The residence nil-rate band taper will continue to start at £2 million. The rates of tax are also unchanged, with the main death rate staying at 40%.

Corporation Tax

The changes to corporation tax were announced in March 2021 and remain unchanged.  The rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for profits under £50,000 will be 19% with relief for businesses with profits under £250,000 so that they pay less than the main rate of 25%.

ISA Allowances

The adult ISA annual subscription limit for 2022-23 will be maintained at £20,000 and the annual subscription limit for Junior ISAs and Child Trust Funds for 2022-23 will be maintained at £9,000.

Pensions

There was a reprieve on pension tax reliefs with no significant changes to tax regime for registered pension schemes. Pension related changes announced were:

Net pay for low earners
Some 5 years after the ‘net pay’ issue for low earners was raised we now have a plan from the Government, albeit one that won’t be implement until April 2025, enabling lower paid earners that pay into a net pay scheme to claim a top-up on pension contributions they have made in 2024-25 and onwards. The process for claiming the top-up won’t impact how individuals save into a pension scheme. HMRC will contact impacted individuals following the tax year contributions were made offering them a top-up payment. It appears there will be no backdating of the top-up for contributions made in years before 2024-25 saving the Government significant sums. The Government confirm that the top-up payment could affect an individual’s entitlement to income-related benefits.

Regulatory charge cap for DC pension schemes
The Government will consult further on the charge cap, broadly 0.75% applied to default investment arrangements in DC automatic enrolment schemes, to unlock remaining barriers for DC institutional investment into illiquid investments, by accommodating certain performance fees that exist for these types of investment. This announcement follows the publication of regulations earlier this year by the DWP to help schemes invest in such long-term assets.

New Consultations/Consultation Outcomes

VAT treatment of fund management fees
The government will consult on options to simplify the VAT treatment of fund management fees.

Other

Tax Avoidance – Clamping down on promoters of tax avoidance
New measures will be introduced that will allow HMRC to freeze a promoter’s assets so that the penalties they are liable for are paid, close down companies that promote tax avoidance schemes, and introduce new penalties for UK entities which support these types of schemes.

Tax table

Best Wishes

Richard and the Best PriceFS Team