In Focus: Tax Year End  

Tax tricks pulled out of the chancellor's hat

For example, HM Revenue and Customs' yield from CGT has risen significantly in recent years, with the latest total almost double the £8.1bn collected five years ago and more than treble the £4bn collected a decade ago.

This is partly due to the 2020 Budget, which lowered the lifetime limit for Entrepreneurs Relief (now Business Asset Disposal Relief) from £10mn to £1mn. This has cost some business owners millions in extra tax when they sell their stakes.

According to analysis from Bowmore Financial Planning, this has helped the UK’s capital gains tax bill to jump 35 per cent, from £10.8bn to a record £14.6bn in the previous tax year to this one.

For now, here is the latest FTAdviser Tax Table, detailing at-a-glance all the changes in today's Spring Statement.

FTA Tax Table Spring 2022

 Budget 2020 changesChanges in 2021 March statement

Budget October 2021

Spring Statement 2022                         
Income tax and personal allowancesGov't pledges to meet commitment to raising income tax personal allowance to £12,500 and the higher threshold to £50,000 by end of this parliament. Once it reaches £12,500, it will rise in line with CPI.

Personal Allowance tax threshold frozen. Basic rate income tax threshold was to have increased to £12,570 and remain at this level until 2026. (£50,270 for higher rate).

 

Bringing the £12,570 threshold into immediate effect. 

 

Basic rate of income tax will be cut from 20p in the pound to 19p from 2024.

Dividend taxNo changes mentioned.Allowance remained at £2,000Legislation introduced in the Finance Bill 2021-22 to raise the rates of income tax applicable to dividend income by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. 
Pension allowancesIncrease to earnings threshold of £90,000 for the tapered pensions annual allowance, meaning the threshold will now kick in at £200,000. However, individuals who continue to be affected by the TAA will see their minimum TAA reduced from £10,000 to £4,000. LTA rising in line with CPI as previous Budgets stated.

Pensions Lifetime Allowance frozen at £1.073m.

No changes to the PLA or MPAA.-
Capital gains taxOnly a change to entrepreneurs' relief. Company founders can pay a discounted CGT rate of 10% when they sell their businesses, compared with the 20% rate typically applied, but their lifetime rate is being slashed by 90%.

No CGT hike, despite pre-Budget speculation to the contrary. Annual exemptions frozen until 2026.

From 27 October 2021, the deadline for residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days.-
Bank levyNew Economic Crime Levy introduced to combat white-collar fraud.

Reviewing the surcharge to make sure banks will not be hit by higher corporation tax as well as the levy.

Bank corporation tax rate of 25% confirmed. The rate of the surcharge to be set at 3% from April 2023. -
Inheritance taxNo changes mentioned.

Nil-rate bands frozen until 2026.

Nothing mentioned.-
Corporation taxPlanned cut in corporation tax rate will not happen this year, but will remain at 19%

To rise after 2023 to 25 per cent. Will not affect the smallest companies; existing rate will apply to those with profits of less than £50,000 a year.

Confirmation of rise to 25%-
Tax on savings interestJunior Isa and Child Trust Fund subscriptions will double to £9,000.

No new subscription hikes

No changes to subscription rates.-
National Insurance contributionGovernment is increasing the threshold for when NI becomes payable to £9,500. Changes to NIC allowances will save employees £104 a year, and self-employed individuals £78 a year.No changesAs previously announced, a 1.25 percentage point hike on all workers to help pay for a new health and social care tax (see below)-
VATSupporting businesses with VAT cut as part of Covid response.

VAT relief - still halved at 12.5 per cent to help retail and tourism industry in particular. Will not revert to standard 20 per cent until next year. This should reduce VAT receipts this year by almost £5bn.

No major changes.Households with energy-saving materials installed will pay 0% VAT on them.
Stamp Duty Land TaxAn additional 2 per cent SDLT announced for foreign buyers from April 2021.

July 2020 stamp duty holiday, raising threshold from £125,000 to £500,000, now extended to the end of June 2021. A £250,000 limit will continue until the end of September; thereafter will revert to £125,000. A new Mortgage Guarantee for 95 per cent loans.

No further SDLT reliefs 
Environmental taxesClimate Change Levy ongoing 

Plans to remove some of the red tape around people using alternative energy sources. 

5p cut in the price of petrol per litre for 12 months.

Business rates and Restart Business rates multiplier frozen from 1 April 2022 until 31 March 2023. A new temporary business rates relief for eligible retail, hospitality and leisure buildings for 2022-23. Eligible properties will receive 50% relief. A new 100% improvement relief for business rates, to take effect in 2023 and be reviewed in 2028. From 1 April 2023 until 31 March 2035 targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible heat networks, to support the decarbonisation of non-domestic buildings. Business rates revaluations to take place every three years, instead of five.Confirmation of the reliefs already mentioned.
Entrepreneurs' relief (Business Asset Disposal Relief)Confirmation the Entrepreneurs’ Relief lifetime limit will drop from £10m to £1m. This applies to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020. This relief will be renamed the relief ‘Business Asset Disposal Relief’ for tax years 2020-21 onwards 
New: Health and Social Care tax--

New for 2022 and beyond, a 1.25 percentage point increase will be placed on National Insurance contributions, alongside a 1.25 per cent dividend tax, in order to pay for a £86,000 cap on the cost of social care. This will, from 2023, become a separate levy to fund social care.

 
New: Residential Property Development Tax--Government will introduce a new tax from April 2022 on the profits that companies and corporate groups derive from UK residential property development. 

New: Employment Allowance relief 

 

 

---From April 2022, the allowance will increase to £5,000 and will affect half a million small businesses.

 

Simoney Kyriakou is senior editor, FTAdviser