On 27th October 2021, the Chancellor of the Exchequer presented his Autumn Budget and Spending Review to Parliament. It outlined the government’s plans for UK taxes and spending, with more focus, it seems, on spending this time.
The Budget also came at an unusual time, as there had already been another presented in March of the same year, and results announced from a recent spending review, which detailed how the government will fund public services for the next three years.
After the speech was made, the independent Office for Budget Responsibility (OBR) published a report on the health of the economy. According to the OBR — which monitors government spending — government borrowing in October 2021 was down £0.2 billion from last year, totalling £18.8 billion. For the year to date, the government borrowing stands at £127.3 billion, which is down by 44.8% (£103.4 billion) compared to the same period last year.
So, in a world recovering from the effects of the pandemic, and seemingly an economic boost in the UK, how will the Autumn Budget affect our money in terms of taxes, pensions and property?
Taxation
Arguably the main part of the Autumn Budget, and the area that the public want to know the most about, is taxes.
In terms of income tax, the personal allowance will remain at £12,750 from the year 2022/23 to 2025/26, as will the higher rate threshold of £50,270. Higher earners, therefore, will pay a combination of basic rate and higher rate tax.
If you earn more than £100,000, then your personal allowance of £12,750 is cut by 50p for every £1 of income, meaning when your income reaches £125,140, you lose your personal allowance completely. However, with some expert financial planning advice, you can bring your income below the £100,000 threshold, by gifting to charity or contributing to your pension, for example.
The dividend allowance will remain at £2,000. However, the rate of tax for any dividends above the allowance will rise by 1.25% from 2022/23.
It’s proposed that an increase to the rates of dividend tax, will raise around £13 billion per year for spending on health and social care across the UK, alongside the new Health and Social Car Levy.
The Health and Social Car Levy will affect employers, employees, and those who are self-employed, who pay National Insurance contributions. The measure sets to temporarily increase the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions for the 2022/23 tax year by 1.25%. From April 2023, this is expected to reduce back to the levels of the 2021/22 tax year, and instead, be replaced by a new 1.25% Health and Social Care Levy.
The initial rise in rates aims to increase the revenue to support the NHS, whereas the Health and Social Care Levy for 2023 onwards aims to support UK health and social care bodies.
The lower national insurance thresholds for contributions will rise by 3.1% in line with the Consumer Prices Index (CPI) inflation.
Pension schemes
The lifetime allowance for the savings in your pension pots, will remain at £1,073,100. If you are an individual saving into a pension scheme using a Net Pay Arrangement, then you could benefit from a system being introduced in 2025/26.
This system will enable HMRC to make 20% top-up payments directly to low-earning individuals with this type of pension scheme, in respect of contributions made from 2024/25 onwards. It aims to align the outcomes equivalent to those using Pension Relief at Source to save into pension schemes.
Property and capital taxes
The Capital Gains Tax (CGT) annual exempt amount for individuals will remain at £12,300 for the year 2022/23, and there are no changes to stamp duty land tax rates. However, the deadline for reporting and paying CGT when selling a UK residential property will increase from 30 days to 60 days (after completion).
In terms of government spending, there’s £24 billion set for housing, with £11.5 billion going towards the development of 180,000 affordable homes. The transition to net zero was also in focus, as £3.9 billion was set to decarbonise buildings. This includes £1.8 billion to support low-income households in this transition, alongside reducing their energy bills.
These are just some of the highlights from this year’s Autumn Budget. But with these and further measures announced by the government, now more than ever, is the perfect time to think ahead. You can use the measures set out to direct or adjust your financial plan. Remember, any tax benefits will depend on your personal tax position and rules are subject to change, so it is always best to seek the advice of a professional financial adviser.
