PETER HUGHES – CHARTERED ACCOUNTANT                                                                

This summary outlines the principal tax measures announced in the Budget on  27 October  2021. Except where stated, the changes take effect for the 2022/23 tax year.   

Personal tax and national insurance  

Income tax bands remain  unchanged as follows: personal allowance £12,570, higher rate threshold £50,270, additional rate threshold £150,000.These rates will remain unchanged until  2026.  

Dividend tax rates increase by 1.25%.The rates will be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.  

Pensions  

The lifetime allowance will remain unchanged at £1,073,100 until  5 April 2026. The annual allowance remains at £40,000.  The earliest age at which most pension savers will be able to access their pension without incurring an unauthorised payments tax charge will be increased from its current level of 55 to 57 on 6 April 2028.  

Although there was widespread relief that the Chancellor did not cut the annual allowance nor the lifetime allowance, he is nevertheless taking a silent cut from wealthier savers by freezing the lifetime allowance despite higher inflation. Aegon is quoted in he Financial Times as follows: “The lifetime allowance is effectively punishing those who have done the right thing and saved regularly over the course of their lives ….With inflation on the rise, that punishment is greater and more wide reaching, making it an area that requires reform in the years ahead.”  

Non-taxpayers saving into “net pay” employer pension schemes currently receive no tax rebate from the government.  Starting in 2025/26, these employees will start to receive government top-ups. This measure will benefit  1.2 million workers (mainly women, says The Times), who  will receive a top-up of £53 on average. 

Business tax

The annual investment allowance of £1 million was due to expire at the end of 2021 but will be extended to 31 March 2023. The intention is that the limit will then reduce permanently to £200,000.  

Currently, sole traders and partnerships are taxed on profits arising in an accounting period ending in a tax year. For example, a sole trader with a year end of 31 December is taxed in 202 1/22 on its profits in the year ended 31 December 202 1 (because this is the accounting year which ends in 2021/22). The Finance Bill 2021/22 will change this so that businesses are taxed on profits or losses arising in a given tax year. The new method will apply from 2024/25.  

Special transitional rules will apply in 2023/24. A business could suffer double taxation as a result of the new rules, but overlap relief will be available. Where additional taxable profits remain even after deducting overlap relief, businesses will have the option to spread this over five years.

Capital gains tax

The CGT annual exempt amount remains at £12,300 until 2026.

The deadline for UK residents to report gains on UK residential property will rise from 30 days to 60 days. This will also apply to non-UK residents reporting gains on any UK property. The change takes effect for transactions completed on or after 27 October 2021.

Inheritance tax

The IHT threshold remains at £325,000. It is predicted that the Treasury will receive £7.6bn from inheritance tax in 2026/27, up from £5.1bn in 2019/20. This is because many people have seen their house price rise and investments grow.

MY PRACTICE AND CONTACT DETAILS

I qualified as a Chartered Accountant in 1997 with Malthouse & Company, a practice in Liverpool City Centre, and moved on in 1999 to work in property management. In January 2004 I started my own practice, initially in Birkenhead but then in York from 2008.

Many of my clients have been with me since the mid-2000s and value the personal and prompt service I offer, whether they need in house VAT training, a visit to discuss VAT issues or ad hoc advice over the telephone or by email. Any telephone advice I give is followed up within a short time by an emailed summary.

I am a member of the VAT and Duties Subcommittee of the ICAEW Tax Faculty, and I am one of the ICAEW’s representatives on HMRC’s Land and Property Liaison Group

Peter Hughes, M.A., F.C.A.
11 Sails Drive,
Heslington,
York
YO10 3LR
Tel 01904 421570;
Mobile: 07801 810694
P.D. Hughes Consultancy Services Ltd
Company No 06841251 (Registered in England & Wales)
peter@pdhughesconsultancy.co.uk 
www.pdhughesconsultancy.co.uk
8 November, 2021