27 October 2021
Rachel McEleney, associate tax director, Deloitte, comments:
“Taxpayers without dividend income will generally not see a change in their income tax liabilities from this tax year to next, based on the Chancellor’s announcement today. However, many have effectively missed out on a tax cut. Without the freezes announced in March 2021, the personal allowance and basic rate band would have increased by £390 and £1,200, respectively. This would have resulted in reductions to income tax of up to £78 for basic rate taxpayers, £396 for most higher rate taxpayers and £240 for additional rate taxpayers.
“Similarly, the freezing of the pensions lifetime allowance at £1,073,100 could be costing some taxpayers up to £21,395 in additional lifetime allowance charges if they take their benefits in 2022/23.
“Although the increase in the lower NIC thresholds announced today would normally give rise to a saving, most taxpayers will be subject to higher NIC in 2022/23 due to the increase in rates by 1.25% as part of the funding for health and social care. Only those with earnings below £12,875 and/or trading profits below £11,710 will see a reduction in NIC.
“The combination of the freezing of the personal allowance and higher rate threshold together with the increase in NIC rates may have a significant effect for some taxpayers. For example, an employee who is below state pension age who earns £50,000 should expect to pay income tax and NIC totalling £12,802 in 2022/23. In the absence of the changes, the total liability would have only been £12,222 (£580 lower).
Capital gains tax
“As announced in the Spring Budget 2021 the capital gains tax annual exemption has been frozen at the 2020/21 level of £12,300 for individuals, and £6,150 for trustees, until 2025/26. Without this freeze, the exemptions would have been £12,800 and £6,400, respectively, in 2022/23. The CGT rates are also unchanged. It was also confirmed today that the reporting and payment window for CGT on disposals of UK residential property by UK residents, and all UK land and property and certain interests in property rich companies by non-UK residents, will be increased from 30 days to 60 days, easing the time pressure for property sellers. This welcome change, which follows recommendations by the Office of Tax Simplification, comes into effect from today.
“In Scotland the rates applying to non-savings non-dividend income are set by the Scottish Parliament. The personal allowance, national insurance and rates and thresholds applying to other income and gains are the same as the rest of the UK. The Scottish Budget is due to be held on 9 December 2021, so income tax liabilities for non-savings non-dividend income in 2022/23 for Scottish residents are not yet known.
“Similarly, the Senedd is responsible for the setting of Welsh income tax rates on non-savings non-dividend income for taxpayers living in Wales. To date the Welsh rates have remained aligned to those set by Westminster. The Welsh Draft Budget is due to be held on 20 December 2021.”
@DeloitteUK for live comment
Deloitte has a range of spokespeople available to comment on today’s Budget. They can be reached on 020 7007 3333 or 0207 303 5054 or one of the following numbers:
• Debapratim De - Senior economist (07789 036 944)
• Amanda Tickel - Head of tax policy (07920 270 964)
• Rachel McEleney - Personal tax (07826 891 752)
• Alison Lobb – Corporate tax (07826 952 940)
• James Warwick - Employment tax (020 7303 6924)
• Andrew Clarke – Indirect tax (07824 895 798)
• Katherine Lampen – Climate change/sustainability (020 7303 6924 / 07920 270 964)
• Gerry Biddle – Business rates (07826 952940)
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