Autumn Budget 2021: Private Client Tax

27 October 2021 / Insight posted in Articles

It was not clear before today whether we would see several key tax measures announced for private clients – potentially encompassing capital gains tax, inheritance tax and pensions – or whether it would be a quiet day for private client tax. In the end, the not unwelcome position was that very few changes were announced, with most tax bands and allowances being unchanged.

 

Income tax rates bands

As previously announced, the personal allowance and higher rate bands will remain unchanged at £12,570 and £50,270 from April 2022.  The starting rate band for savings income (£5,000), the annual ISA allowance for adults (£20,000) and children (£9,000) and the Child Trust Fund allowance (£9,000) are also all frozen for next year.

As announced last month, however, the tax rate on dividends will increase by 1.25% across all tax bands. Dividends paid after 5 April 2022 will be taxed at 8.75% within the basic rate band, 33.75% in the higher rate band and 39.35%.in the additional rate band.

Moore Kingston Smith comment

The personal allowance and higher rate bands are now expected to remain the same for the next five years, with fiscal drag meaning that an increasing number of people will start to pay tax or be higher rate taxpayers in the next few years. This will be the sixth year in a row that the ISA allowance for adults has not changed.

The increase in the rate of tax on dividends corresponds with the Health and Social Care Levy, which will affect tax paid by employees, employers and the self-employed.

 

Capital gains tax

The rates on capital gains have not changed.

The deadline for reporting disposals of residential property and for paying tax on any capital gains has been increased from 30 to 60 days from completion, for disposals on or after 27 October 2021.

Moore Kingston Smith comment

There have been concerns for a while that capital gains tax rates could be increased, and many will therefore be reassured that no such announcements have been made.

The original 30-day deadline for reporting residential property disposals has been challenging for some, and it is encouraging that this is being increased to 60 days, and indeed that it is being implemented with immediate effect.

 

Personal Pensions

Where an individual’s pension contributions exceed the annual allowance in a tax year, and where they have an Annual Allowance charge as a result, they can ask their pension scheme administrator to pay the charge by reducing future benefits. The government will now extend the reporting and payment deadlines for this approach.

The government will also increase the earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge, from 55 to 57, with effect from 6 April 2028.

Moore Kingston Smith comment

The deadline extension should provide greater flexibility and will be welcomed by those for whom this is relevant. Any individuals taking advantage of this, and those for whom the increase in the minimum pension age will be relevant, should consider what impact these could have on their plans.

 

Health and Social Care Levy

This was originally announced in September, and will initially be collected as an additional 1.25% national insurance charge on employees, employers and the self-employed from 6 April 2022.

From 6 April 2023, this will become a separate charge, at which point it will be extended to encompass individuals over state pension age.

Moore Kingston Smith comment

This measure broke the triple lock manifesto pledge not to increase tax, national insurance or VAT rates, and would not have been taken lightly. The money raised from this measure is intended to be used directly to support the NHS and equivalent bodies across the UK.