The Chancellor, Rishi Sunak, presented his Autumn Budget and Spending Review on 27 October 2021
Dividend tax rates and allowances
As part of the health and social care funding package, dividend tax rates are increased by 1.25% from 6 April 2022. As a result, for 2022/23, the ordinary dividend rate is 8.75%, the upper dividend rate is 33.75% and the additional dividend rate is 39.35%.
The dividend allowance remains at £2,000.
Savings rates and allowances
The starting rate for savings will remain at 0% for savings falling within the savings rate band. This remains at £5,000, but is reduced by any taxable non savings income (and eliminated entirely where taxable non-savings income is £5,000 or more).
The personal savings allowance remains at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. Additional rate taxpayers do not receive a savings allowance.
The rate of corporation tax will remain at 19% for the financial year 2022, which starts on 1 April 2022.
However, as announced at the time of the March 2021 Budget, from 1 April 2023, companies with taxable profits of £250,000 and above will pay corporation tax at a rate of 25%. A small profits rate of 19% will apply to companies with taxable profits of £50,000 or less.
Companies with profits of between £50,000 and £250,000 will pay corporation tax at the rate of 25%, as reduced for marginal relief. The marginal relief fraction is 3/200. The impact of marginal relief is that where profits fall between £50,000 and £250,000, the effective rate of corporation tax gradually increases from 19% to 25%, with a higher marginal rate applying to profits in that band.
The limits are reduced proportionately for short accounting periods, and where a company has associated companies, by the number of associated companies plus one.
National Insurance contributions
Employees and employers
Increases to the rates of National Insurance contributions applying for 2022/23 had already been announced as part of the funding package for health and adult social care. The thresholds, some of which were already known, were confirmed at the Budget.
As far as Class 1 contributions are concerned, as announced in the March Budget, the upper earnings limit applying for primary Class 1 purposes is frozen at £967 per week to maintain the alignment at the point at which higher rate tax becomes payable. The upper secondary
thresholds which are aligned with the upper earnings limit also remain at £967 per week. These are:
• the upper secondary threshold for employees under the age of 21;
• the apprentice upper secondary threshold, applying to apprentices under the age of 25; and
• the veterans’ secondary threshold, applying to armed forces veterans in the first year of their first civilian employment since leaving the armed forces.
A new upper secondary threshold, applying in respect of the earnings of a new Freeport employee, comes into effect from 6 April 2022. This is set at £481 per week.
The other Class 1 thresholds are increased in line with the increase in the Consumer Prices Index. The lower earnings threshold is increased to £123 per week, the primary threshold is increased to £190 per week and the secondary threshold is increased to £175 per week.
The rates of primary and secondary Class 1 contributions are increased by 1.25% for 2022/23 only. The main primary rate is 13.25% and the additional primary rate is 3.25%, while the rate payable by certain married women is 7.1%.
Employers will pay secondary Class 1 contributions at the rate of 15.05% for 2022/23. The Class 1A rate and the Class 1B rate are also 15.05%.
The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.
The employment allowance remains at £4,000 for 2022/23.
The self-employed pay two Classes of National Insurance contribution – Class 2 and Class 4.
Class 2 contributions are payable on profits in excess of the small profits threshold. For 2022/23, the small profits threshold is £6,725 and the Class 2 rate is £3.15 per week. The special Class 2 rate payable by share fishermen increases to £3.80 per week for 2022/23, while the special Class 2 rate payable by volunteer development workers increases to £6.15 per week.
Class 4 contributions are payable on profits where these exceed the small profits limit. This is increased to £9,880 for 2022/23. By contrast, the upper profits limit, which is aligned with the point at which higher rate tax becomes payable, is frozen at £50,270.
As with Class 1 contributions, the Class 4 rates are increased by 1.25% for 2022/23 only pending the introduction of the Health and Social Care Levy. Consequently, the main Class 4 rate is 10.25% and the additional Class 4 rate is 3.25%. They are due to return to their 2021/22 levels from 6 April 2023 when the levy comes into effect.
The weekly rate of voluntary Class 3 National Insurance contributions is set at £15.85 for 2022/23.
Health and Social Care Levy
The Health and Social Care Levy will apply from 1 April 2023. It will be charged at the rate of 1.25% of earnings on which a qualifying National Insurance contribution is payable. This is a Class 1 contribution (primary and secondary), a Class 1A contribution, a Class 1B contribution and a Class 4 contribution.
The legislation giving statutory effect to the levy is contained in the Health and Social Care Levy Act 2021.
Capital gains tax
Capital gains tax rates and exempt amount
The capital gains tax annual exempt amount remains at £12,300 for 2022/23, while the annual exempt amount for trustees remains at £6,150. The amounts are frozen at these levels until 2026.
Capital gains tax is charged at 10% where income and gains fall within the basic rate band, and at 20% once this band has been used up. Higher rates of 18% and 28% respectively apply to residential property gains and carried interest.
Residential capital gain tax
Where a chargeable gain arises in respect of a UK residential property, that gain must be reported to HMRC and a payment on account of the tax due must be made.
The time limit for reporting the gain and paying the associated tax is increased from 30 days to 60 days for disposals that complete on or after 27 October 2021.