Our new(ish) Chancellor set out his plans for the coming years in today’s Autumn Statement – Stability, Growth and Public Services.
He unusually started with the tax changes – maybe to get the bad news out first.
It has been clear over the recent weeks, touted on TV and in the news that taxes were going to ‘go up’ and Jeremy Hunt advised that ‘those with more are going to be asked to contribute more’.
This started with the lowering of the rate band for the additional rate of tax. On income over £125,140 individuals will be paying at 45%. This seems a strange number but when you consider that the personal allowance is £12,570 and this is restricted by £1 for every £2 in excess of £100,000, it means that higher rate taxpayers will drop into 45% when their personal allowances has been fully restricted. This equates to additional tax of up to £1,243 for those taxpayers earning more than £150,000.
Next, the ‘stealth taxes’, which cannot be stealth when verbalised but all allowances and rates bands for personal taxes, inheritance tax and national insurance will be retained at their current rates until April 2028. Alongside the retention of the employer’s NIC allowance set at £5,000 and current VAT threshold.
However, allowances are being restricted for tax-free dividends and capital gains tax.
From April 2023 the £2,000 dividend allowance will be reduced to £1,000 and from April 2024 to £500. A maximum additional tax charge of £393.50 in 2023 and £196.75 in 2024.
At the same time, capital gains tax allowances will be reduced from £12,300 to £6,000 and then £3,000 in April 2024. This creates potential additional tax of up to £1,764 and £840 respectively.
Interestingly, unless it appears in the subsequent paperwork, there have been no changes to pension tax relief.
With the growth in the electric car market, the VED exemption will be removed and company car tax rates will increase annually by 1%.
The new Stamp Duty Land Tax rates which were introduced recently to stimulate the market, will be retained until March 2025.
Overall, the changes (or not changes) have in the main been expected, but the biggest decisions to make may be around asset disposal and whether transactions can be managed before the new tax year.
If you have any questions regarding the 2022 Autumn Statement and how the changes might affect you or your business, please get in touch.
Lucy Orrow – Senior Tax Manager