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Autumn Budget 2021 Summary

Thursday, October 28th, 2021

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:

  1. Taxation changes
  2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

  • Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
  • Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
  • Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.

National Insurance

Boris Johnson announced – earlier this year – a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:

  • Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
  • The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021.

The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

  • Taxable profits up £50,000 will continue to be taxed at 19%
  • Taxable profits more than £250,000 will be taxed at 25%
  • Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.

From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.

Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023.

The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019.

Van and car benefit changes

This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports. They are:

  • implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
  • make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
  • amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.

 

Other announcements

Business rates changes

The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes

  • Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
  • Alcohol duty rates will be frozen.
  • Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
  • Aggregates Levy – the government will freeze the Levy rates in 2022-23.
  • Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
  • VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
  • VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
  • Fuel Duty rates for 2022-23 will remain frozen.
  • Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.

ISA investment limits for 2022-23

The limits set for 2022-23 are:

  • Adult ISAs the limit remains at £20,000
  • Junior ISA limit remains at £9,000
  • Child Trust Funds remain unchanged at £9,000

National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:

  • The 21 to 22 year-old rate will be £9.18 per hour
  • The 18 to 20 year-old rate will be £6.83 per hour
  • The 16 to 17 year-old rate will be £4.81 per hour
  • The apprentice rate will be £4.81 per hour

Time to tighten the belt ?

Tuesday, October 26th, 2021

Later this week (27 October 2021) Rishi Sunak will present his second budget during 2021.

It is likely that reduced public expenditure and higher taxation will be features of this budget as the Treasury seeks to limit any further rise in government borrowings. The Chancellor will also have in mind increases in inflation and the growing possibility that interest rates may need to increase next year.

More recently, global trading has been hit by a series of additional issues (Brexit for example) that have conspired to delay supply chains. Witness the recent petrol shortages and gaps on supermarket shelves.

Further, it seems clear that sectors of our economy that have benefitted from the free movement of labour from the EU, are now under-resourced as they struggle to find replacements in the UK employment market.

We have also witnessed the ending of major support by government to employers and the self-employed (primarily the Coronavirus Job Retention Scheme and the Self-Employed Income Support Scheme) and it is hard to find evidence that the time for the easing of belt-tightening will be coming any time soon.

These challenges come at a time when we all have a need to relax and break loose from the restrictions placed on our business and personal lives by the COVID pandemic.

Let’s hope that the Chancellor has some strategies in mind to ease our present discomforts. Next week our posts will update you on the major announcements in the budget, and hopefully, there will be some good news to report.

New global tax system

Monday, October 25th, 2021

To tax multinational companies on business transactions completed in the UK, our government introduced the Digital Services Tax (DST) April 2020.

The US response was to threaten to levy tariffs. However, a compromise has been reached that will see the introduction of a global system that will ensure multinationals do pay their fair share of tax in the countries where they do business.

This new global system will be introduced in 2023.

On 8 October 2021, OECD-led discussions resulted in 136 countries agreeing a plan for a new system (known as Pillar One), whilst countries will also operate a minimum 15% corporation tax rate (known as Pillar Two).

As part of this agreement the US will not levy tariffs in response to the UK’s DST. The UK will also keep the revenue raised from the DST until the Pillar One reforms become operational. The DST credit agreement outlines that once Pillar One is in effect, firms will be able use the difference between what they have paid in DST from January 2022, and what they would have paid if Pillar One had been in effect instead, as credit against their future corporation tax bill.

This means that the UK will not lose out on tax revenue in the transition period, as for each business, the UK either retains the amount raised that Pillar One would have delivered if it had been in place originally, or the total revenue from our DST.

The DST will then be removed in favour of the global solution, which was always the UK’s intention.

Details in a recent press release confirm:

  • The agreement signed is between the US, UK, France, Italy, Austria, and Spain.
  • Under Pillar One of the OECD agreements, the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters.
  • The rules would apply to global firms with at least a 10% profit margin – and would see 25% of any profit above the 10% margin reallocated and then subjected to tax in the countries they operate. Pillar 1 will be implemented through a Multilateral Convention (MLC) with this aiming to come into effect in 2023.

Under Pillar Two, the G7 also agreed to implement a 15% global minimum corporation tax, aiming to become effective from 2023. This will be operated on a country-by-country basis, creating a more level playing field for UK firms and cracking down on tax avoidance.

Time to let your hair down.

Thursday, October 21st, 2021

We are all due a little rest and recuperation. The last eighteen months have been challenging and stressful. If, big if, COVID infection is contained this winter, perhaps we could start to consider celebrating with and family and friends during the Christmas break.

And why not fund a “business” related event that will have the support of the taxman?

If you are careful with your budgeting, you can enjoy a staff party without increasing your tax or National Insurance payments. Here’s what you need to consider:

What's exempt?

You might not have to report anything to HMRC or pay tax and National Insurance. To be exempt, the party or similar social function must meet all the following criteria:

  • The cost must be £150 or less per head.
  • The event must be an annual event, such as a Christmas party or summer barbecue.
  • The event must be open to all your employees.

If your business has more than one location, an annual event that’s open to all your staff based at one location still counts as exempt. You can also have separate parties for different departments if all your employees can attend one of them.

If the combined cost of the events is no more than £150 per head, they are still exempt. You do have to report how much social functions and parties are worth to each employee if they are a part of a formal salary sacrifice arrangement.

 

A few additional considerations

  • The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend to arrive at the cost per head.
  • The figure of £150 is not an allowance. For functions that are outside the scope of the exemption directors and employees are chargeable on the full cost per head, not just the excess over £150, in respect of: themselves and any members of their family and household who attend as guests.
  • If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, where the cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, HMRC do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable.

If you need help organising your annual celebration in the most tax effective way, please call.

What is cabotage?

Tuesday, October 19th, 2021

Although it sounds like a culinary dish – a cabbage compote (?) – cabotage is defined as the transport of goods or passengers between two places in the same country by a transport operator from another country.

Its present relevance is a rule that restricts hauliers from the EU who can only make two cabotage trips within seven days.

In an announcement by the Department of Transport issued 14th October, there is a proposal to extend cabotage to foreign transport operators that would allow them to make unlimited journeys for two weeks before returning home.

Could it be yet another attempt to ease the present supply issues?

The announcement goes on to say:

“Thousands more HGV deliveries could be made each month in the UK under government plans to help bolster the country’s supply chains by temporarily extending so-called ‘cabotage’ rights.

Subject to a one-week consultation, the temporary measures would come into force towards the end of this year for up to six months, helping secure supply chains in the medium term alongside the wider package of measures government has put in place to address the shortage of drivers more broadly.

The relaxation would apply to all types of goods but is likely to be particularly beneficial to food supply chains and goods that come via ports, by ensuring lorries from abroad coming into the UK are used more efficiently, helping to tackle the temporary global supply chain pressures brought on by the pandemic and the global economy rebounding.

It comes as the government continues to address the current global shortage of HGV drivers which is affecting countries around the world and builds on the raft of measures that have already been announced to support the sector, including boosting testing capacity, and streamlining the licence process.”

This is good news for UK businesses that are supplied from the EU. Fingers crossed that it is introduced in time for Christmas…

Reduction in support for hospitality sector

Thursday, October 14th, 2021

The temporary reduced rate of VAT (5%), introduced to assist qualifying hospitality trades disrupted by COVID lockdown measures, was increased to 12.5% from 1 October 2021. Based on present information, from 31 March 2022, this 12.5% rate will revert to the 20% standard rate.

This reduction in VAT applied to the sales of hospitality trades will have allowed VAT registered traders to retain more of their turnover subject to VAT if no change was made to their selling prices.

If no change in selling prices

For example, for every £10,000 of income received and subject to VAT at 20%, hospitality traders would retain £8,333.

During the period up to 30 September 2021, when the rate of VAT on hospitality trades was reduced to 5%, for every £10,000 of income received hospitality traders would retain £9,524.

Since 1 October 2021, for every £10,000 of income received including VAT at the 12.5% rate that now applies, for every £10,000 of income received hospitality traders will retain £8,889.

And from 31 March 2022, its back to square one. Turnover will revert to a 20% VAT charge.

If traders have passed on VAT reductions to customers

If traders have decided that it was more beneficial to pass on VAT savings to their customers the reduction in VAT would have allowed them to drop their prices as follows – all figures based on a selling price of £100 before VAT was added:

  • Selling price at 20% VAT – £120
  • Selling price at 5% VAT – £105
  • Selling price at 12.5% VAT – £112.50

And, of course, traders can pass on some of the VAT reductions to customers and retain the difference.

What is clear, is that this support for the hospitality industry is being phased out. Much now will depend on how effective government is in keeping the downside disruption of COVID to a minimum. Otherwise, the Chancellor may have to dig-deep to find other ways to support this significant industry sector.

Practical considerations

As turnover from 1 October is subject to a 12.5% rate of VAT, affected traders will need to add a 12.5% rate to their accounting software and use this new rate for the period 1 October 2021 to 31 March 2022. The 12.5% is a new rate of VAT and accordingly will not be included as a choice in most accounts software.

If you are unsure how to do this please call, we can help

Tax year end – all change?

Wednesday, October 13th, 2021

At present, self-employed traders (sole traders and partnerships) are taxed for each tax year on profits for the accounting period ending in that tax year.

Therefore, if a trader’s accounting year end is 31 December, their assessment for 2021-22 will be based on adjusted profits for the year ending 31 December 2021. Which means that actual profits earned from January to March 2022 will not be assessed until the following tax year, 2022-23.

While profits are rising, the existing system means that tax collection on a proportion of profits is delayed by one year. And consequently, if profits are falling, tax payable may be higher than if profits had been assessed on an actual basis.

Based on current information being released by HMRC, it would seem that they now want all self-employed persons to be taxed on actual profits earned in a tax year. If this change is followed through it would prepare traders for the shake-up of income tax assessment to a quarterly, digital upload from April 2024. It would mean that all self-employed year ends would change to 31 March.

Aside from the effects on HMRC’s switch to a Making Tax Digital reporting for income tax purposes, any move to change from assessments being based on accounts’ years ending in a tax year (say the year to 31 December) to results actually made in a tax year (trading years ending 31 March) would involve a process of transition that could have unexpected changes to tax bills in the year the transition is undertaken. Bills for affected taxpayers could increase or decrease.

As HMRC have announced that their MTD for income tax change will start April 2024, we can expect more on a possible change to an actual basis quite soon.

Better late than never

Thursday, October 7th, 2021

A recent HMRC press release confirmed that sole traders and buy-to-let property businesses (but not incorporated businesses) will have an extra year to prepare for the digitalisation of Income Tax.

Recognising the challenges faced by many UK businesses and their representatives as the country emerges from the pandemic, and having listened to stakeholder feedback, the government will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.

A later start for MTD for ITSA gives those required to join more time to prepare and for HMRC to deliver a robust service, with additional time for customer testing in the pilot.

We also suspect that the delay will give HMRC’s under pressure staff more time to make the necessary changes to their IT systems and fully beta test their MTD ITSA processes.

Making Tax Digital for Income Tax will be mandated for sole traders and landlords with a business income over £10,000 per annum in the tax year beginning in April 2024.

General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025, while the date other types of partnerships will be required to join will be confirmed in the future.

In March 2021, the government announced a new, fairer system of penalties for the late filing and late payment of tax for ITSA. The new penalty system for those who are mandated for MTD for ITSA will now come into effect in the tax year beginning in April 2024, and in the tax year beginning in April 2025 for all other ITSA taxpayers.

This major change in the taxation of affected sole traders and landlords is thus deferred for a further twelve months.

However, we recommend that all mandated business owners and landlords who presently record their accounting details manually or on rudimentary spreadsheets, give urgent attention to adopting an approved digital accounts software that will be fit for purpose when the new implementation date arrives, April 2024.

We can help. Call now so we can assist with the choice and implementation of suitable software. As well as providing you with the means to comply with the new MTD ITSA requirements, using an appropriate accounts software package will also provide you with access to real-time data, information that can only help as we steer a path through present challenges.

New measures to ease fuel supply chain pressures

Tuesday, October 5th, 2021

The UK Government has announced that further measures will be put in place to help ease supply chain pressures as spikes in demand for fuel create a panic buying hysteria.

This added pressure to already stretched supply chains is a further blow to affected businesses across the UK.

The Government has announced the new measures in a bid to help ease issues currently affecting petrol stations across the UK, including the placement of a team of military drivers to improve delivery of fuel to out of stock petrol retailers.

Last week saw motorists across the UK panic-buy fuel after BP and Esso warned that their stations were experiencing a shortage of petrol and diesel deliveries due to the shortage of HGV drivers.

Despite efforts made by the UK Government to assure the public that there was no reason for concern or panic buying, cars descended in their thousands to petrol stations across the country to fill up their vehicles despite the Government’s advice.

Business Secretary Kwasi Kwarteng said:

“The UK continues to have strong supplies of fuel; however, we are aware of the supply chain issues at fuel station forecourts and are taking steps to ease these as a matter of priority.”

Transport Secretary, Grant Shapps, has authorised an extension to ADR driver licenses, which allow drivers to transport goods, such as fuel. This will aim to provide immediate relief to the shortage of HGV drivers, by allowing affected drivers to maximise their available capacity instead of being taken out of circulation for refresher training purposes.

It doesn’t stop with fuel, however. As a result of many EU drivers returning to their home countries due to COVID-19 and Brexit, a stock and supply shortage crisis has emerged in the UK, with an estimated shortfall of 100,000 drivers, according to the Road Haulage Association (RHA). Meanwhile, the existing workforce is rapidly ageing. The industry body is warning that about a third of the UK’s 380,000 drivers may retire within the next five years.

Last week, the Government announced a further package of measures to help ease supply chain pressures, including an introduction of short-term visas for HGV drivers, increasing HGV testing and establishing bootcamps to train up to 3,000 more people to become HGV drivers, providing more flexibility for the industry.

Dividend tax increases

Monday, October 4th, 2021

If you have been keeping up with announcements from Downing Street, you will know that from April 2022 the hybrid rates of Income Tax on dividend income are increasing by 1.25 percentage points.

The changes from April 2022 are:

  • The first £2,000 of dividends received are free of any additional tax charge, no change here.
  • If you are a basic rate tax payer, your dividend income in excess of £2,000 will be taxed at 8.75% (presently 7.5%).
  • If you are a higher rate tax payer, any dividend income that falls into the higher rate band will be taxed at 33.75% (presently 32.5%).
  • If you are an additional rate tax payer, any dividend income that falls into the additional rate band will be taxed at 39.35% (presently 38.1%).

Even with these increases, it is likely that director/shareholders adopting the high dividend, low salary strategy will still save on NIC costs.

Savers who have their funds in tax-exempt wrappers, ISAs for example, will be unaffected.

Other savers would need to have fairly significant portfolios outside tax exempt investments in order to pay any dividend tax. With average dividend yields running at approximately 3.5%, you would need to have a portfolio in excess of £57,000 to breach the £2,000 tax-free limit.