Rishi Sunak, has delivered his Autumn Budget and whilst there was plenty of “tinkering” around the edges of certain taxes and duties (alcohol duties, air passenger duty and tonnage tax), the BIG 3 of the UK tax world i.e. Income Tax, National Insurance and VAT were left untouched.
This is not surprising, because in so far as National Insurance is concerned he effectively “jumped the gun” by pre-announcing a 1.25% increase for employers, employees and the self-employed in a statement last month. This “temporary” (they never are!) tax increase will start life as additional national insurance contributions in April 2022 but will then switch in April 2023 to a separate and distinct charge called the health and social care levy – so much for the previous soundings from the Treasury team about simplifying the UK tax system!
Also, to make sure that those business owners who fund themselves via dividends instead of salary and benefits, are not feeling left out he will also add this 1.25% charge to the tax rates on dividends which for the tax year 2022/23 will increase to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers – shame he never thought to round up these rates of tax to the nearest £1 in order to give us tax guys a break!!
Ah well at least these tax increases don’t break his manifesto pledge of not increasing either Income Tax or National Insurance because it’s a new “levy” and Dividend Tax is not Income Tax – believe that one if you will?!!
So with an upwardly direction on personal taxes and also business taxes (Corporation Tax was increased in the March 2021 statement from 19% to 25% on companies with profits > £250K) the mood music from the Treasury continues to contradict significantly the Chancellor’s comment on Wednesday that “my goal is to reduce taxes” – well perhaps he did on a bottle of prosecco or a pint of draught beer purchased in a pub (remember them?) but he will need to make a significant change in fiscal policy if he is to reduce the % that taxes contribute to UK GDP – the highest its been for over 50 years!
I must end on a positive note, so will mention the extension of the Annual Investment Allowance (AIA) of £1m spent on qualifying plant and machinery will now continue up to March 2023, it was going to revert to the original £200k limit at the end of this year so well-done Rishi for keeping this in place for longer.
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