ICAEW's Tax Faculty's provides a summary of the announcements on personal tax in the Autumn Budget 2021.
The rates of income tax, capital gains tax and inheritance tax remain unchanged.
Personal allowances and thresholds
Standard personal allowance
Basic rate band
Higher rate threshold
Additional rate threshold
2021/22 - 2025/26
* Personal allowance is reduced by £1 for every £2 that adjusted net income (ANI) is above £100,000 (so personal allowance is zero if ANI is £125,140 or above).
** A lower higher rate threshold applies to earned income of Scottish taxpayers.
The transferrable marriage allowance will remain at £1,260 for 2022/23.
The dividend allowance is unchanged at £2,000.
Dividend tax rates increase by 1.25% from 6 April 2022, taking rates to:
- 8.75% for basic rate taxpayers and personal representatives who are liable to tax on dividends paid into estates of deceased persons under s14 Income Tax Act 2007,
- 33.75% for higher rate taxpayers and on loans to participators under s455 Corporation Tax Act 2010, and
- 39.35% for additional rate taxpayers and trustees.
The personal savings allowance is unchanged at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and £nil for additional rate taxpayers.
The starting rate for savings tax band is unchanged at £5,000.
The exemption from income tax of household support fund payments, and similar payments made in devolved administrations, will be confirmed in secondary legislation in Spring 2022.
HMRC will not collect any income tax on payments made from October 2021 to the date the legislation takes effect.
The household support fund is a £500m fund to help vulnerable households with essentials.
The annual exempt amount for capital gains tax (CGT) is unchanged at £12,300 and will remain at this level until 5 April 2026.
CGT 30-day reporting for property sales
The deadline for UK residents to report and pay CGT after selling UK residential property will increase from 30 days to 60 days after completion. When mixed-use property is disposed of by UK residents, the 60-day payment window will apply only to the residential element of the property gain.
For non-UK residents disposing of any type of property in the UK, whether directly or indirectly owned, the deadline will also increase from 30 days to 60 days.
These reforms will apply to transactions that complete on or after 27 October 2021.
ICAEW welcomes this extension, which was recommended by the OTS and in our Budget representations (see ICAEW REP 95/21).
Find out more
The inheritance tax nil rate band (NRB) is unchanged at £325,000.
The IHT residence NRB (RNRB) of £175,000 is also unchanged. The tapering of the RNRB will continue for estates worth more than £2m.
The bands will remain unchanged until 5 April 2026.
The subscription limits are unchanged for 2022/23 (they apply UK wide):
- Individual Savings Account (ISA) annual subscription limit is £20,000;
- Junior ISAs annual subscription limit is £9,000; and
- Child Trust Funds annual subscription limit is £9,000.
The lifetime allowance is unchanged at £1,073,100 and will remain at this level until 5 April 2026.
The annual allowance limit is unchanged at £40,000.
The earliest age at which most pension savers can access their pension savings without incurring an unauthorised payments tax charge will be increased to 57 (currently 55) from 6 April 2028.
Top-ups for low earners paying via net pay arrangements
Low earners saving into pension schemes via an employer who uses a net pay arrangement (ie, where tax relief is given via payroll, which for a non-taxpayer will be £nil) will receive top-up payments direct from the government.
These top-ups will help better to align outcomes with individuals saving into pension schemes using relief at source (ie, where the government pays amounts equivalent to basic rate tax relief on contributions into the pension scheme).
These top-ups will start to be paid in 2025/26 in respect of contributions made in 2024/25 onwards. An estimated 1.2 million individuals, 75% of whom are women, could benefit by an average of £53 a year.
ICAEW welcomes this measure as it resolves a longstanding anomaly that we drew to the attention of government, but we are disappointed that it will take HMRC four years from the budget announcement to update its systems and start repaying these low paid employees, many of whom work in the public sector.
Find out more:
- Pensions tax relief administration: call for evidence (gov.uk)
- Pension schemes newsletter 134 — October 2021 (gov.uk)
Pension scheme pays reporting and payment deadlines
Pension scheme pays reporting and payment deadlines for pension scheme members and administrators will be extended.
This is to allow individuals who have retrospective increases in UK tax -relieved pension contributions, or entitlement that is greater than the annual allowance in a tax year, to ask their pension scheme to settle their annual allowance charge of £2,000 or more from a previous tax year by reducing their future pension benefits.
The new deadline for such individuals to ask their pension scheme to pay is based on when the scheme administrator provides the pension scheme member with information on pension scheme input amounts, rather than 31 July after the tax return deadline as is the case presently.
The changes will have effect from 6 April 2022 but will be retrospective for tax years 2016/17 onwards.
Find out more:
Public service pension reform
Changes will be made to the pension provision of public servants affected by the public service pension reforms to ensure that the pensions tax framework applies as intended (the McCloud case remedy). It will address age discrimination and have retrospective effect from 1 April 2015.
Find out more:
State pension uprating
The earnings element of the triple lock used to uprate the state pension and pension credit will temporarily be suspended owing to a statistical anomaly. Instead, for 2022/23, the new and basic state pension, pension credit and survivors’ benefits in industrial death benefit will increase by the higher of CPI or 2.5%.
The Chancellor closed the Autumn Budget by announcing a permanent cut to the rate at which universal credit (UC) payments are reduced when recipients increase the number of hours they work.
The current rate of 63% means that for every £1, after tax, a person earns their UC payment is reduced by 63 pence. Rishi Sunak confirmed that this rate will be reduced to 55%. It’s the first change to the taper rate since April 2017, when the rate was reduced from 65%.
Alongside the change to the taper rate, HM Treasury has confirmed that there will be a £500 per year increase to the working allowance – the amount households can earn before the UC taper applies.
Currently the allowance is set at £293 per month for households receiving housing support and £515 for those that do not receive support. The change will increase earnings limits to £334 and £556.
In his Budget speech the Chancellor confirmed that the government would not wait for the start of the new tax year to implement these changes but committed to having them in place by 1 December 2021.
HM Treasury estimates that 1.9m households will benefit from the changes to UC, and while they will help to alleviate the impact of the removal of the £20 per week uplift for many, they won’t help all of those affected. Recipients not working due to unemployment, sickness or disability will not see any increase to their UC payments.
The temporary increase in the surplus earnings threshold to £2,500 will continue to April 2023 before reducing to £300.
Other changes to state benefits mentioned and scored in the Red Book include:
- The government had legislated in May 2021 to ensure that child benefit would continue to 31 August in the final year of full-time education if COVID-related exam cancellations in 2021/22 would have meant the loss of three months’ worth of payments.
- Individuals arriving from Afghanistan will be entitled to child benefits and DWP income related benefits from the day they arrive in the UK.
- Bereavement Support payments and Widowed Parents Allowance will be extended to people with children who were cohabiting with a partner but not married or in a civil partnership. This was announced in July 2021 and will come into effect once a remedial order is approved by parliament.
- An exemption from the shared accommodation rate for victims of domestic abuse and modern slavery will be introduced from October 2022 rather than October 2023, allowing them to claim a higher local housing allowance rate.
- Individuals affected by COVID-19 will be able to claim new-style Employment and Support Allowance from day one rather than day eight; this easement will continue until 24 March 2022.
- Two changes are being made to the disability benefits system following the Health and Disability green paper published in July 2021. The special rules for terminal illness will now apply where an individual is expected to be in their final 12-months of life, rather than six. The government is also intending to test better triaging of cases and a new severe disability group for those with severe life-long conditions.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
The Tax Faculty reflected on the Chancellor's announcements in this essential webinar. Freely available, watch the recording to find out what the Autumn Budget 2021 could mean for you and your clients.