By James Fraser, Tax Partner, Armstrong Watson LLP

WHILE the Autumn Budget delivered some good news for lower-paid workers, this will come at a cost to businesses struggling to bounce back from the pandemic.

The Chancellor did not say a great deal about personal taxes because several announcements had already been made in the previous budget. In addition, he has recently announced the Health and Social Levy. The combined impact of these will be that working people will pay more taxes.

The standard personal allowance reached £12,570 in April 2021 and was frozen from that date until April 2026. This will mean that as wages increase - and the Chancellor indicated that these were increasing by 3.5 per cent a year - more people will find themselves either being dragged into paying tax or pushed into the higher tax bracket.

The Health and Social Levy which was announced in September, and will be introduced from April 2022, will add 1.25 per cent to National Insurance Contributions for employees, reducing their take-home pay. It will also be paid by the business employing that member of staff. Furthermore, the rate at which dividends are taxed was also increased by 1.25 per cent. Dividends are received by lots of people, from those in retirement to business owners and whilst there is an exemption for the first £2,000 of dividends received, anything above this will be subject to the new levy. The increase in the National Living Wage, from £8.91 to £9.50, will bring much-needed relief to the lower-paid, although for employers this will obviously increase their costs and may also have an onward increase on other staff costs too.

Another positive was the reduction in the universal taper applied to earnings when someone qualifies for Universal Credit. This had been set at 63 per cent, but the Chancellor, quite rightly, saw this as a ‘tax’ on working people and reduced this taper to 55 per cent, which he claimed would see families better off by between £1,200 and £1,800 a year. It’s also hoped this change will allow people to take on more hours, which will help businesses with staffing issues. Finally, despite much concern that there would be changes to pension tax relief, the Chancellor decided, for now, to avoid changes in this area meaning the ability to get sizeable amounts of tax relief on pension contributions remains available. The Chancellor acknowledged that the tax burden is now at a historically high level and he will undoubtedly hope that he can reverse some of the increases or announce other tax cuts before the next election.

For advice, contact James Fraser on 07793 621979 or email