UK Tax Rates & Budget Update

Budget update

From a tax perspective, not much new was announced. The main items that are likely to impact our clients are:

  • confirmation of the increase in dividend taxes by 1.25% (See below and our note 8/9/21)
  • confirmation of the 1.25% increase in National Insurance from April 2022 (See our note 8/9/21)
  • extension of Capital Gains Tax payment terms on property disposals from 30 days to 60 days
  • confirmation of the introduction of Scale Up, High Potential Individual and Global Mobility visas in Spring 2022. Read about these visas here.
  • the National Living Wage will rise from £8.91/h to £9.50/h from April 2022 and now applies to people 23 years old and older. (see the rates here)

You can read the budget here.

UK tax rate update

During the budget 27/10/21 the UK Government announced that from 6 April 2022, the rate of Income Tax on dividends will increase by 1.25%. This also means that the tax on overdrawn directors loan accounts will also increase. We have taken this opportunity to include a summary of the key rates applicable to most of our clients below. Note that in some cases different rates apply to Scotland.

Summary of UK tax rates

 Current rate (to 5/4/22)New rate (from 6/4/22)
Dividend Tax rates and allowance  
Ordinary rate7.5%8.75%
Upper rate32.5%33.75%
Additional rate38.1%39.35%
Dividend Allowance£2,000Unchanged
Income Tax rates  
Basic rate20%20%
Higher rate40%40%
Additional rate45%45%
Capital Gains Tax rates for individuals  
Standard rate10%Unchanged
Standard rate (residential property)18%Unchanged
Higher rate20%Unchanged
Higher rate (residential property)28%Unchanged
Annual Exemption£12,300Indexed to CPI
Standard rate*20%  Unchanged
Reduced rate5% Unchanged
Zero rate0% Unchanged
Personal allowance & tax bands**  
Personal allowance£12,570Unchanged
Basic rate bandUp to £37,700 Unchanged
Higher rate band£37,701 to £150,000Unchanged
Additional rate bandOver £150,000Unchanged
Corporation Tax ratesCurrent rate (to 31/3/22)New rate (from 1/4/22)
Corporation Tax rate***19%19%

*The standard VAT rate for hospitality, holiday accommodation and attractions has been temporarily reduced to 12.5% until 1 April 2022.

** The personal allowance reduces the tax bands on incomes up to £100,000. The Personal Allowance reduction is then tapered until the income reaches £125,140 at which point no personal allowance is available.

***The Government has said that the Corporation Tax rate will increase for large companies from 19% to 25% from 1/4/23. The 19 % rate will continue to apply to small companies (profits up to £50,000) with marginal relief for profits of up to £250,000.

Tax on overdrawn Directors loan accounts

The tax on overdrawn directors loan accounts (known as s455 tax) will increase from 32.5% to 33.75% in line with the increase in the tax rate on dividends.

Budget update From a tax perspective, not much new was […]

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