The chancellor, Rishi Sunak announced the Autumn Budget on Wednesday. A ‘New economy’ as it was branded to help us get through the winter. We digest the budget and give the main highlights and what it means for you. If you did want to read the full budget, please click here
National Living Wage
There is a lot to get through and one of the notable changes in the Chancellors budget was the increase in the National Living Wage. We will see an increase in pay to £9.50 per hour for anyone aged 23+ from April 2022. That’s an increase of 6% from the current £8.91 and the pay rise worth extra £1,000 for full time workers.
Social Care Levy
A new health and social care levy is to be introduced on all of us. It is a 1.25% charge on
National Insurance from April 2022. The rate also affects Employers National Insurance, and the dividend rates will also change in line with the new social care levy of 1.25%
• Employees National insurance will change from 12% to 13.25%
• Employers National Insurance will change from 13.8% to 15.05%
• Sole traders National Insurance will rise from 9% to 10.25%
Dividend rates as follows:
• Lowest rate 8.75% from April 2022
• Mid-rate 33.75%
• High rate 39.35%
From April 2023 the 1.25% social care levy will show as a separate section of the tax rate system. National Insurance will revert to where it was.
Why is this social care levy coming in?
The funds from the social care levy will be used for care homes and funding for pensioners. This includes several reforms to how people pay for adult social care in England, supported by £5.4 billion of investment over the next three years.
The reforms include:
• From October 2023 a cap on personal care costs of £86,000.
• The threshold above which somebody is not eligible for local authority support towards their social care costs (upper capital limit) is increasing from £23,250 to £100,000 from October 2023.
• The threshold below which somebody does not have to contribute towards their care costs from their capital (lower capital limit) is increasing from £14,250 to £20,000.
• If somebody has capital between £20,000 and £100,000 the local authority may fund some of their care, but they may have to contribute up to 20% of their chargeable assets per year (in addition to their income).
• Increasing the amount of income that care recipients can retain after contributing towards their care costs (the Minimum Income Guarantee and the Personal Expenses Allowance) in line with inflation from April 2022.
Corporation Tax
From April 2023 changes to corporation tax are coming in place. The reintroduction of the marginal rate system which has been done away with for several years.
Corporation tax rates for business with:
• Profit £50,000 or below – 19% rate
• Profit between £50,000 to £250,000 - 25% rate (less marginal relief calculation)
• Profit above £250,000 - 25% rate
Super deduction for purchase of equipment and allowance capital allowances will bring tax relief of 130% applies to incorporated (Limited companies, PLC’s) business only and is in place for two years. 1 April 2021 to 31 March 2023
The £1 million annual investment allowance is still available to every company including sole traders.
Business Rates
A new one year 50% business rates discount for retail, hospitality, & leisure businesses for England. Wales already have a discount in place until April next year. We will have to see what the Welsh government say in December for the updates of business rates in Wales.
Small business rates relief still apply.
Universal Credit
Universal Credit taper rate is cut by 8%, as of now for every £1 earned, 63p gets taken off. With the new rate cut, for every £1 earned, 55p will be deducted. Allowing lower paid people to keep hold of more benefit when they are working. The target date for this is 1st December.
Alcohol Duty
The tax on some alcoholic drinks such as beer, cider and wine will be slashed. The drinks with lower-level percentage of alcohol will mean a lower rate of tax. This means that next time you go to the pub and order a pint or on a night out, a glass of prosecco, will be a little bit cheaper.
It doesn’t matter if it is UK produced or imported. Tax relief for small brewers that produce under 8% alcohol.
The budget brings about optimism boosted by prediction of higher growth for the UK after Covid. The Chancellor hit an upbeat tone as he talks up building a “stronger economy of the future”. Again, if you want the full version of the budget, please click here
