Posted 28th November 2022
The Chancellor used the Autumn Statement in an attempt to calm the markets and reset the public finances with a series of tax rises achieved through cuts and freezes to allowances.
During a very short period of time in office he had already reversed most of the measures announced in his predecessor’s September Mini Budget. In this statements he went further by reducing the CGT annual allowance exemption, lowering the additional rate threshold to £125,140 and extending the freezing of other allowances by a further two years.
A summary of the key points from the Autumn Statements is as follows:
Income tax:
Rates – Income tax rates for 2023/24 will remain unchanged, the abolition of the additional rate of tax announced in the mini budget will not happen.
Allowances and thresholds – The point at which additional rate tax becomes payable will be reduced from £150,000 to £125,140 from 6 April 2023. This will mean those already paying tax at 45% will pay an extra £1,243 in 2023/24. The personal allowance and basic rate band remain frozen at £13,570 and £37,700 respectively until April 2028. This means the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.
Dividends – The allowance will be reduced by half from £2,000 to £1,000 for 2023/24 and halved again to £500 for 2024/25. Consequently, many more investors will need to complete tax returns if their dividend income exceeds £1,000 in 2023. The dividend tax rates will remain at 8.75%, 33.75% and 39.35% for both the current year and 2023/24.
Pensions:
No charges were announced to pension tax relief. It was also confirmed that the triple lock on the State Pension would be maintained, guaranteeing the 10.1% CPI- based increase for next April along with the same level of increase to Pension Credit.
There has been an ongoing review of State Pension age and whether the current timetable for changes is still appropriate. The government will publish its response in early 2023.
No mention was given to any extension to the freeze to the lifetime allowance which is expected to remain fixed at £1,073,100 until April 2026.
National Insurance:
The increase to NI to help pay for social care reforms isn’t happening. The additional 1.25% which was added to the NI rates for 2022/23 for employees, employers and the self employed has now been removed. NI thresholds will be fixed at the current 2022/23 levels.
Capital Gains Tax:
It was announced that the CGT annual exemption will be reduced from £12,000 to £6,000 from April 2023 and to £3,000 from April 2024. The rates of CGT remain unchanged and will continue to be 10%, and 20% (18% and 28% respectively for gains on residential property).
Inheritance tax:
The freeze on both the nil rate band (NRB) and residential nil rest band (RNRB) has been extended for an additional two years. The NRB will remain at £325,000 and the RNRB at £175,000 until April 2028.
Corporation tax:
Corporation tax will rise to 25% from April 2023 as originally planned. However, small companies with profits below £50,000 will continue to pay at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits between £50,000 and £250,000 so they pay less than the main rates.
If you have any questions, please do get in touch with us.