- UK Inflation will continue to rise due to continuing supply issues and rising energy prices. Average UK Inflation expected to be more than 4% in 2022. Impacting savers with negative real interest rates
- Tax currently is at its highest as a % of GDP since the 1950s.
- As announced in September the Health and Social Care Levy of 1.25% will be added to NICs. From April 2023 “once HMRC’s systems are updated”. The levy will be formally separated out from April 2023 and will apply to earnings, including those individuals above the state pension age who are still working. From April 2023 NICs will return to their 2021/22 rates
- Dividend tax rates will increase from April 2022
- Dividend Ordinary Rate will go from 7.5% to 8.75%
- Dividend Upper Rate will go from 32.5% to 33.75%
- Dividend Additional Rate will go from 28.1% to 39.35%
- ISA annual subscription level will remain at £20,000 for the TY 2022/23
- JISA annual subscription level will remain at £9,000 for the TY 2022/23
- Starting rate for the savings rate band remains at £5,000 for 2022/23
- Annual Investment Allowance for corporate investment on plant and machinery remains at £1m until April 2023.
- Further measure to clamp down on “promotors” of tax avoidance schemes
Update on UK funds review
The government will publish its response to the UK funds review as well as the consultation on options to review the VAT treatment of fund management fees, “in the coming months”
From a financial planning point of view there were no big announcements on IHT or pensions tax relief. But I would remind everyone that the March Budget introduced:
- The freezing of the personal allowance at £12,570 until April 2026
- The freezing of the CGT AEA at £12,300 until April 2026
- The freezing of the Pensions Lifetime Allowance at £1,073,100 until April 2026
- The continued freezing of the IHT nil rate band at £312,000 (it has been pegged at this amount since 2009)
- The freezing of ISA and JISA limits for 2022/23
- We will see dividend tax rates increase from April 2022.
- We will see the introduction of the Health and Social Levy at 1.25% as from April 2022 via increase to NIC rates and then a stand-alone tax charge from April 2023
From our perspective therefore no major headlines to be concerned about but the freezing of key allowances and exemptions in March speaks clearly that fiscal drag will remain a key element of this Chancellor’s tax strategy. Why go through the political pain of raising headline rates when this approach can be just as effective? Tax wrapper selection therefore continues to play an ever-increasing important part in the advice conversation.