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Autumn Budget 2021: At a glance

28 October 2021

4 minute read

We give you the lowdown on how the Autumn Budget will impact your income, savings and investments.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

What you’ll learn:

  • What the Budget means for your tax bills
  • How the new measures will impact your savings and investments
  • Why planning ahead and using allowances is crucial.

Chancellor Rishi Sunak delivered an Autumn Budget on Wednesday aimed at outlining a roadmap for rebuilding public finances.

It came on the same day that the Office for Budget Responsibility (OBR) figures showed the UK's economic recovery is expected to be faster than previously expected, returning to pre-Covid levels by 2022.

UK growth is now forecast to be 6.5% for 2021, 2.1% next year and 1.3% in 2023.

Major tax hikes for individuals had already been announced, with National Insurance and dividend tax both rising 1.25 percentage points in April 2022. The more you earn, the bigger an impact this will have.

These were reiterated by the Chancellor this week in his Autumn Budget, which also contained a number of new measures that affect our personal finances.

Here’s what you need to know:

1. Taxes

National Insurance

Lower NI thresholds were included in the Budget that would normally give rise to a saving. However, most taxpayers will be subject to higher National Insurance Contributions (NIC) in 2022/23 due to the increase in rates by 1.25 percentage points as part of the funding for health and social care.

Dividends

As previously announced, each investor can receive £2,000 in dividends a year without paying tax. Above that basic, higher and additional-rate taxpayers would pay 7.5%, 32.5% and 38.1% respectively.

For basic rate taxpayers it will rise to 8.75% in April 2022. For higher-rate and additional-rate taxpayers it will rise to 33.75% and 39.35% respectively.

Capital Gains Tax

The Chancellor announced that there will be an increase in the payment window for capital gains tax purposes in relation to UK property disposals. The current payment window is 30 days, but has now been extended to 60 days.

Inheritance Tax (IHT)

IHT thresholds remain unchanged. The nil-rate band has been frozen at £325,000 since 2009/10, so IHT has been increasing in real terms over time. Had inflationary adjustments not been suspended as a result, the nil-rate band would now be £417,000.

2. Inflation

The Chancellor revealed that the Office for Budget Responsibility expects the Consumer Price Index (CPI) inflation rate will rise from 3.1% in September to 4% over the next year.

3. Savings and Investments

ISA allowances frozen

The annual ISA allowances were unchanged at £20,000 for the 2022/23 tax year and £9,000 for Junior ISAs.

Green Savings Bond

The Budget confirms the launch of the Green Savings Bonds made available to customers via NS&I on 22 October. The NS&I Green Savings Bonds are a three-year fixed-term savings product with an interest rate of 0.65% and customers can invest between £100 and £100,000. As with all NS&I products, the Green Savings Bonds come with a HM Treasury-backed 100% guarantee. They will be on sale for a minimum of three months.

4. Pensions

The government will consult on changes to the charge cap – currently at 0.75% – for pension schemes to allow investment in more illiquid, future growth projects.

There was no change to the pensions lifetime allowance which remains frozen at £1,073,100.

5. Earnings

Millions of workers will get a pay rise next year when the National Living Wage is increased from £8.91 an hour to £9.50. The 59p hourly boost is equivalent to a pay rise of more than £1,000 per year for a full-time worker on the living wage (or £22 extra each week, when working a 35-hour week) before tax. The increase, to apply to all over-23s, will take place on 1 April 2022.

6. Spending

Fuel duty

The Chancellor announced that the planned rise in fuel duty has been cancelled. The levy has been frozen at 57.95p per litre for petrol and diesel since March 2011. It was due to rise this Autumn. The Chancellor stated this would save the average driver £1,900.

Air travel

Domestic air passenger duty has been reduced. Flights between airports in England, Wales, Scotland and Northern Island will see a lower rate of air passenger duty.

Alcohol duty

The planned rise in alcohol duty has been cancelled. Going forward the Chancellor will streamline duty rates which are currently different across types of beverages.

There will be just six duty rates on alcohol – the stronger the drink, the higher the rate.

7. What action should I take?

It’s worth doing everything you can to manage your finances and spending as efficiently as possible.

  • Investments: Continue to take advantage of tax breaks such as the annual ISA allowance and where possible consider having dividend-paying investments in an ISA where no tax is due. With inflation rising it’s important to keep your money working hard.
  • Taxes: Think about inheritance tax planning sooner rather than later. Investing tax-efficiently and considering options such as gifting could ensure that more of your assets are passed on to family members or charitable causes.
  • Financial planning: It pays to make provisions for your future sooner rather than later. It’s never too early to take control of your finances.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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