The Autumn Budget 2021 came and went last week and, while it may have lacked the major changes to self-employed tax and financial support that many contractors might have been hoping for, there were nonetheless several announcements relevant to the UK’s contractor workforce.
Firstly, the government announced that the current rate of income tax will remain fixed for a further four years, until April 2026. This means that, for the next four years, the income tax personal allowance will remain at £12,570, the basic rate will stay at £37,700, while the higher rate will remain at £150,000.
Despite calls for a u-turn, the Autumn Budget also brought with it confirmation that National Insurance Contributions (NICs) will increase by 1.25 per cent from April of next year. The April 2022 NIC increase will apply for one year, with NICs returning to their current rate from April 2023. Despite this, the 1.25 per cent increase will remain in place as a new, separate tax called the Health and Social Care Levy.
Alongside this increase in NICs, the Budget also confirmed that the dividend tax rate will also rise by 1.25 per cent from next year. Despite the increase, the £2,000 per year tax-free allowance will remain in place.
Further announcements include the news that the National Living Wage will rise from £8.91 to £9.50 per hour for those aged over 23 from next April. Meanwhile, with fuel prices reaching record highs over recent weeks, the Budget also brought with it the welcome news that the government’s planned increase in fuel duty will be scrapped.
From next year, corporation tax will rise to 25 per cent for certain businesses, but businesses that earn profits of less than £50,000 per year will continue to be charged the current 19 per cent rate. Businesses earning annual profits of £50,000-£250,000 will also be offered relief.
Finally, the Budget brought news that tax-free pension contributions will not change, with the maximum amount of £40,000 remaining in place.
Author: Steven English
5.11.2021
