How much tax do I pay? Autumn Budget 2021 impact on Council Tax, Capital Gains Tax and National Insurance explained

Rishi Sunak’s Autumn Budget has already hit the headlines this week as the Chancellor’s major post-Covid-19 spending plans have either been leaked or briefed to the media.

Indeed, they have generated a few too many pre-Budget headlines for the speaker of the House of Commons Lindsay Hoyle’s liking, with Hoyle admonishing the Government for not revealing the plans to Parliament first.

So far, we’ve heard the Government will provide a £5.9bn capital spending boost for the NHS, £6.9bn to improve transport links across the UK, £5bn for scientific research and development and a £3bn investment in skills training.

While not all of this is new money, it still represents a major spending drive.

And with the pre-Budget news revealing little about where the money will come from, economic commentators have predicted taxes could well increase.

So how much tax do we currently pay - and how could that change after the Chancellor’s Autumn Budget 2021?

Here’s a breakdown of the key taxes which could be altered by Rishi Sunak and how they could change.

Council Tax

Across the UK, local authorities charge council tax to residents to fund local facilities and services - essentially everything from bin collections to local policing.

How much you’re charged depends on the kind of property you live in, regardless of whether you’re the homeowner or a tenant.

Properties are split into council tax bands depending on what their value would have been on a given date.

In England and Scotland, this date is 1 April 1991. In Wales, it is 1 April 2003.

The three nations all have differing values for their bands.

Meanwhile, Northern Ireland operates a separate system of domestic rates, which are based on rental values and depend on the region the property is situated in.

At the start of October, the Local Government Association warned council tax may have to rise to plug a financial black hole in social care and alleviate the pressures faced by other frontline services.

Rishi Sunak refused to rule out hiking council tax at the Conservative Party Conference, leading to speculation the average rise could be between 5% and 6%.

It means many households could see their spendable income decrease.

Andrew Dixon of the Fairer Share Campaign told the Evening Standard that such a hike would be a “levelling down” action as it would exacerbate the wealth disparity across the UK, with northern constituencies paying a higher proportion of council tax.

Capital Gains Tax (CGT)

Capital gains tax is meant to be paid on the profit you make on any possessions or investments you sell.

It can also be applied to the increase in value of possessions or investments from the date you acquired the assets if you give them away.

For basic-rate taxpayers, i.e. those earning up to £50,270 in England, Wales and Northern Ireland, capital gains are currently taxed at 10%.

For those who pay income tax at 40%, the rate doubles to 20%.

You can earn up to £12,300 in profits from assets before paying capital gains tax.

There has been speculation that Rishi Sunak will move to increase Capital Gains Tax to bring it closer in line with income tax, or at least to tighten the rules around it.

It comes as the amount received through CGT has been in decline over the past 10 years as people become more aware of the relief options available.

Research from the UHY Hacker Young states the capital gains made in the last 12 months was an effective rate of 14.9%, down from 16.5% in 2010.

Of the £62.7bn gains recorded in 2019/20, just £9.3bn of CGT was paid.

The Office of Tax Simplification recommended that CGT rates be raised to bring them in line with income tax, from a report published in November 2020.

A CGT tax hike would not necessarily hit all UK taxpayers.

National Insurance

Everyone who earns above a certain threshold has to pay National Insurance.

Contributions are paid into a fund, from which some state benefits are paid - for example, the state pension, statutory sick pay or maternity leave.

Employees currently pay 12% on earnings between £9,568 and £50,270 a year, and 2% on earnings above this.

Self-employed people have to pay Class 2 National Insurance contributions of £3.05 a week, payable on profits over £6,515 a year.

Class 4 rates are charged at 9% on profits between £9,568 and £50,270, and at 2% on profits above this.

If you’re directly employed by a company, National Insurance will be deducted from your salary by your employer through PAYE.

Self-employed people have to submit a self-assessment tax return.

Increasing National Insurance contributions has been a controversial move in the past.

In 2017, the then-Chancellor Philip Hammond was forced to scrap a proposed hike after Conservative backbenchers warned it would break a Tory manifesto promise made during the 2015 General Election.

But despite heavy criticism when it was announced earlier in 2021, a 1.25% increase announced by the Prime Minister Boris Johnson that will come into effect from April 2022 appears to be going ahead.

The additional £12bn in income it will generate will be ring-fenced for spending on social care and the NHS.

The rise to National Insurance would hit taxpayers’ spendable income.

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