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Autumn Statement from the Chancellor

Yesterday at 11.30 a.m, Jeremy Hunt delivered his first Autumn Statement as the new Chancellor. As he had pre-warned this included some ‘eye watering decisions’ as he set out the government priorities of stability, growth and public services.

Given that the UK economy is in recession according to the Office of Budget Responsibility (OBR)this was always going to be a difficult budget. Mr Hunt stated that his main aim was to avoid tax rises that damage economic growth

We had already seen most of the changes suggested by Kwasi Kwarteng during his ill-fated tenure as Chancellor being unwound and whilst we didn’t see widescale tax hikes immediately. We have seen a freeze on many of the main allowances until April 2028.

This document highlights the main changes that will have an impact on U.K citizens, with some of the key personal allowances frozen and reduced, it’s never been so important to speak to a financial adviser to ensure you are taking advantage of all of the tax efficient investments available to you.

Income Tax

As anticipated, the personal allowance (£12,570) and higher rate threshold (£37,700 above personal allowance) will be frozen for a further 2 years to 2028.

The additional rate threshold will be reduced from April 2026 to £125,140 (previously £150,000) this has the following impact on high earners:

Tax beforeTax afterImpact
£130,000£44,460£44,703£243
£135,000£46,460£46,953£493
£140,000£48,460£49,203£743
£145,000£50,460£51,453£993
£150,000£52,460£53,703£1,243
£160,000£56,960£58,203£1,243
£170,000£61,460£62,703£1,243
£180,000£65,960£67,203£1,243
£190,000£70,460£71,703£1,243
£200,000£74,960£76,203£1,243

 

The above changes will apply to taxpayers in England, Wales, and Northern Ireland.

The dividend allowance currently £2,000 but originally introduced at £5,000, sheltering dividend receipts from tax will be reduced from April 2023 to £1,000. This will fall further to £500 from April 2024.

Cost for basic rateCost for higher rateCost additional rate
£1,000£82.50£337.50£393.50
£500£123.75£506.25£590.25

This will cost savers the following when compared with the current £2,000 allowance:

Savings and dividend income allowances – rates apply UK-wide.

Capital Gains Tax

As expected, the personal Capital Gains Annual Exempt Amount will reduce from April 2023. Initially the decrease will be £6,000 (tax year 2023/24) falling further to £3,000 in April 2024.

This £6,300 reduction costs taxpayers £630 at basic rate (£1,134 with 8% property surcharge) and £1,260 at higher rate (£1,764 with 8% property surcharge).

The £9,300 reduction from 2024 costs £930 (£1,674 with property surcharge) and £1,860 (£2,604 with property surcharge).

Inheritance Tax

The Inheritance tax main bands – Nil-Rate Band (£325,000) and Residence Nil-Rate band (£175,000) will remain frozen until April 2028. According to Office of Budget Responsibility (OBR) a move which is estimated to net more than an additional £1 billion for government by the 2027/28 tax year.

The government will legislate for these measures in Autumn Finance Bill 2022.

Stamp Duty Land Tax (SDLT)

Earlier this year (23rd September) the level of stamp duty applies on a purchase of a house was increased to £250,000 from £125,000 and in addition there were incentives on offer for first time buyers. The threshold for first time buyers was increased to £425,000 and for the band between £425,000 and £625,000 the SDLT would be 5%.

The Chancellor confirmed in the Autumn Statement that this increase will be reclassified as a temporary reduction in the SDLT and will now only remain in place until 31 March 2025.

National Insurance

It is confirmed that National Insurance lower earnings threshold (LEL) and small profits threshold (SPT) will remain fixed until 2023/24.

The Upper Secondary Threshold will stay fixed at £50,270 per annum until April 2028.

Class 2 national insurance will be set at £3.45 per week and class 3 rate set at £17.45 per week for tax year 2023/24.

ISA allowances

Remain at current levels – £20,000 ISA, £9,000 JISA

Pensions

Triple lock remains in place – The Chancellor confirmed that the basic state pension and the new state pension will increase by inflation (10.1%) next April. The current and new weekly rates are shown below:

Full new state pensionBasic state pension
2022/23£185.15£141.85
CPI Sept10.10%
2023/24£203.85£156.20

(Note: Pre 6 April 2016 additional state pensions increase by CPI each year not by the triple lock).

Annual allowance and Lifetime Allowance – No mention of this was made in the Autumn Statement despite press speculation that the Government were looking at freezing the lifetime allowance for a further 2 years (to April 2018) there was no mention of it in the Autumn Statement. We believe that the current annual allowance (£40,000) and lifetime allowance (£1,073,100) will remain at their current levels until April 2026, and will keep a watchful eye on the Autumn Finance Bill.

Pensions tax relief – there was no mention of fundamental change to pension tax relief. However, because of reducing the additional rate threshold from April 2026 to £125,140 (previously £150,000) pension contributions for those impacted look attractive as a means to mitigate the tax rise. As an example, if someone earned £150k next year and wanting to mitigate the impact of the reduced threshold they could make a gross pension contribution of £24,860 that would gain additional relief (compared to this year) of £1,243.

State Pension Age – The Government is currently reviewing whether the current timetable to increase in the state pension age (legislated to increase over the next 25 years) remains appropriate and will publish its review in early 2023. The current age increase timetable can be found here.

Other points of interest

Additional Compliance Resource for HMRC – The government is investing a further £79 million over the next 5 years to enable HMRC to allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers. This investment is forecast to bring in £725 million of additional tax revenues over the next 5 years.

Tax Table

2022-2023 tax year2023-2024 tax yearFrozen until (Where known)
Personal Taxation
Income tax bands (main rate)
Basic20%20%April 2028
Higher40%40%
Additional45%45%
Starting rates for savings income0%0%
Income tax allowances
Personal allowance£12,570£12,570Dividend allowance reduces to £500 in April 2024.
Starting rate for savings income£5,000£5,000Other income tax allowances frozen to April 2028
Dividend allowance£5,000£1,000
Personal savings allowance£1,000 (BR) £500 (HR) £0 (AR)£1,000 (BR) £500 (HR) £0 (AR)
Capital gains tax rates
Main rates for individuals10/20%10/20%
Residential property18% / 28%18% / 28%
Entrepreneur’s relief rate10%10%
Capital gains tax allowances
Annual exempt amount£12,300 £6,000
Entrepreneurs’ Relief –  Life time limit£1,000,000£1,000,000
Inheritance tax
Nil rate band£325,000£325,000
Residential nil rate band (RNRB)£175,000£175,000
Rate (estates)40%40%
Reduced rate (10% of estate to charity)36%36%
Lifetime Rate (CLTs)20%20%
Trust Taxation
Income tax bands45%45%
Standard rate band39.35%39.35%
Income tax rates
Trust main rate45%45%
Trust dividend rate39.35%39.35%Reducing to £1,500 in 2024
Capital gains tax allowances
Annual exempt amount£6,150 £3,000
Capital gains tax rates
Main rate20%20%
Residential property28%28%
Corporate
Corporation tax19%19 % (profits under £50,000)
25% (profits over £250,000
Companies with profits between £50,000 and £250,000 will be tapered between 19% and 25%.
ISA Allowance
Adult ISA Allowance£20,000£20,000
Junior ISA Allowance£9,000£9,000

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