The Autumn Budget 2021 – Personal Taxes

Autumn Budget 2021 Personal Taxes

The Autumn Budget was announced on Wednesday 27th October 2021.

We go through the key announcements from the budget below. It includes how the budget will affect individuals and the personal taxes that they pay.

For information on how the Autumn Budget 2021 will affect businesses – see Autumn Budget 2021 Business Taxes

Personal Tax announcements in Autumn Budget 2021

Below are the main personal tax announcements:

What is the new personal allowance for 2022/23?


As announced previously the personal allowance is to be frozen for all tax years up to 2025/26.

The current personal allowance is £12,570 and is to remain the same for another 5 years. This freeze will have the effect of taxing many more individuals as inflation increases income over the period.

The most common tax code for 2022/23 will be 1257L – How to check your tax code is correct?

How much do you need to earn to lose your personal allowance?


Individuals with income over £100,000 suffer a loss of the personal allowance. The reduction is £1 for every £2 on income in excess of £100,000.

For the tax year 2022/23 it will mean that no personal allowance is available for anyone earning in excess of £125,140. This is the same as the current tax year 2021/22.

Is the marriage allowance still available?


Yes the marriage allowance is still available. Qualifying couples can transfer £1,260 of their personal allowance to their partner. This saves tax of approximately £250 per annum.

Qualifying couples can back date their claims to 2017/18 which could produce tax savings of over £1,000.

For further information and how to claim the marriage allowance.

What is the basic rate band for 2022/23?


The basic rate band remains frozen at £37,700.

As a result it means that taxes will be charged at higher rate on income over £50,270 (In 2021/22 it was £50,270).

The additional rate band remains the same at income over £150,000.

What are the taxes on savings income for 2022/23?


There were no changes announced. The allowances therefore remain as follows:

– Basic rate taxpayers have a tax free allowance of £1,000.
– Higher rate taxpayers have a tax free allowance of £500.
– Additional rate taxpayers have no tax free savings allowance.

What are the taxes on dividends for 2022/23?


Dividend tax increases were announced in September 2021. This was part of the increased funding into social care, which also included tax increases on National Insurance. The dividend tax rate increase is 1.25% commencing 6th April 2022.

The new rates from next tax year are as follows:

– First £2,000 is tax free. This is the dividend allowance available to all taxpayers.
– Basic rate taxpayers pay dividend taxes at 8.75% (2021/22 – 7.5%).
– Higher rate taxpayers pay dividend taxes at 33.75% (2021/22 – 32.5%).
– Additional rate taxpayers pay dividend taxes at 39.35% (2021/22 – 38.1%).

N.B Dividends held in ISAs are not required to pay taxes.

What are the taxes on capital gains for 2022/23?


There were no changes to the tax rates or allowances on capital gains. The annual exemption remains at £12,300 and is expected to remain unchanged for a further 5 years.

Profits in excess of the exemption are still taxed at 10% for basic rate taxpayers and 20% for those paying higher rates. Residential property gains are taxed at 18% (basic rate taxpayer) and 28% (higher rate taxpayer).

NOTE: Previously there was a 30 day reporting requirement for property disposals which were subject to capital gains tax liability. This has now been extended to 60 days following the completion of sale. This applies for all sales on or after 27th October 2021.

Has the minimum wage increased?


Yes. The minimum wage will increase from 1st April 2022.

For those aged 23 years old and over the new rate will be £9.50.

For the full rates see National Minimum Wage – the new rates from April 2022.

What is the Optimum Directors Salary for the 2022/23 tax year?


The provisional optimum salary for Directors from April 2022 will be £758 per month. This is to be confirmed when the finance bill is published.

For the full details on the current amount of £736 a month see our blog on Optimum Directors Salary 2021/22.

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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