Overall, Chancellor Rishi Sunak’s Autumn budget announced few changes that directly relate to contractors/freelancers. Growth of 6.5% is anticipated for the economy, with expectations that it will return to pre-pandemic size by the start of 2022. Targeted reliefs are planned to reform the tonnage tax system to boost the UK shipping industry, and draught relief aimed to refill Britain’s pubs, with the alcohol duty system also being revamped to align higher duty rates with stronger alcoholic drinks.
For a general overview of all budget matters, BBC/Sky’s summaries are as good as any.
As always, we’ll focus on the tax related announcements most likely to be of relevance to our typical client.
Income tax
Generally, no new announcements within the budget itself.
However, as previously announced in the year the rate of tax paid on dividends and Class 1 & 4 National Insurance Contributions will be increasing by 1.25% from 6 April 2022.
For those trading via a limited company and expecting to be a higher rate taxpayer, it will therefore be more tax efficient to draw further dividends this year, rather than waiting until next tax year. As always, it can make sense to avoid taking your total income above £100k, where the effective tax rate becomes temporarily more penal.
In February/March, we’ll be reviewing your level of income and dividends taken and advising whether it may make sense in your situation to draw further income before the end of the tax year.
Captital gains income tax
Always an area speculated to change, there were no announcements made to the capital gains tax rates, annual exemption, or business asset disposal relief (previously entrepreneur’s relief).
This will largely only be relevant for those of you considering closing/selling your company.
CGT reporting on sale/disposal of residential properties
Currently, when you sell a UK property that hasn’t been your residence for the entirety of ownership, you are required to report and pay the capital gains tax within 30 days of completion. This deadline has now been extended to 60 days for relevant disposals completed on or after 27 October 2021.
Research & development (R&D)
Announcements that tax relief on R&D will extend to include costs incurred relating to cloud computing and data, although not until April 2023. Further details haven’t been provided at this point so we’re unable to say too much on this, and the relief may be subject to change between now and April 2023.
