google-site-verification: google2c3d1a1e44131ecc.html

UK Autumn Budget 2021 – News for HR

29 October 2021 | Guy Abbiss

On 27 October 2021 the Chancellor of the Exchequer delivered the Autumn 2021 Budget.

In terms of changes likely to impact on the taxation of employment income, the budget was very light.

Increase to dividend taxation rate

The most significant changes to employment taxation from April 2022 – the increase of 1.25% in the rates of employee and employer National Insurance contributions (“NICs”), and the corresponding increase in the self-employed NICs rate – have already been enacted separately. For those individuals able to decide whether to become employees or work as self-employed contractors the increase in NICs rates would have made employment status less attractive.

The budget has therefore confirmed the previously-announced rise of 1.25% in the rate of dividend taxation, which is intended to prevent the gap widening between the overall rates of tax and NICs on employment income and income taken as dividends by consultants from personal services companies. This is intended to prevent the change to NICs rates on employment income being seen by individuals as a reason for preferring to engage through a personal service company. The increased dividend rate is not, though, confined to dividends taken from personal service companies, but applies to dividend income generally.

Emergency tax relieving powers

The budget also makes provision for the treasury to make temporary modifications to certain parts of the income tax acts in the event of “a disaster or emergency of national significance”, instead of needing to obtain legislative consent to the temporary changes. This is a response to the COVID-19 pandemic, and is designed to give the treasury the ability to react more quickly to assist taxpayers when such events occur. Any temporary modifications made under the new power can only have the effect of relieving taxpayers from tax liabilities, and cannot be used to create tax charges.

Disclaimer

Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

Circular 230 disclosure

To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

The author

Guy Abbiss
Partner
Employment Law
Compensation and Benefits
International Assignments
D: +44 (0) 203 051 5714
T: +44 (0) 203 051 5711
F: +44 (0) 203 051 5712

Also by the author

29 October 2021
UK Autumn Budget 2021 - News for employment, incentives and benefits
15 September 2021
International Remote Working, Checklist for Employers
16 August 2021
HMRC enquiry nets £29.5M of tax and £4m in penalties from the Home Office
Subscribe to our newsletter
Stay up to the minute on our latest news and insights?