Autumn Statement "Stability & Growth"
On Thursday 17 November, the 4th Chancellor of 2022, Jeremy Hunt, made his first Autumn Statement where he shared his three core priorities focusing on “stability, growth and public services” to support and stabilise the economy.
Jeremy Hunt indicated a rather miserable outlook on the current state of economic affairs, confirming the UK economy is in rececession, together with one third of global economies expected to face a recession this year or next, and suggesting we’d see a rise in unemployment in the coming months. He shared some broad points, stating that he expected “those with more to contribute more” .
Although there were no major headline tax rate increases, the Chancellor has still managed to implement effective tax rises through cutting various tax reliefs and freezing thresholds on income tax, NIC, and Inheritance Tax until at least 2028. The VAT threshold of £85k is also frozen until at least 2026, meaning more businesses will be required to register for VAT as inflation increases.
Tune in to our next LIVE Tax Clinic where we’ll be discussing some key planning measures to consider in light of these changes.
The key points from a tax perspective are set out below;
The current tax free personal allowance of £12,570 and the higher rate income tax treshold of £50,270 will remain until April 2028. This means that as incomes rise, more people will be paying tax and paying tax at a higher rate.
The additional rate threshold at which you pay 45% income tax will be reduced from £150,000 to £125,140 with effect from 6 April 2023. This means that anyone earning above £150,000 will pay a further £1,243 in tax, and anyone earning over £125,140 will start to pay 45% on income above this threshold. This doesn’t change the fact that anyone earning between £100,000 to £125,140 will pay income tax at an effective rate of 60% (excluding NI), although there are sometimes planning measures that can be done. Higher rate taxpayers should consider making pension contributions to maximise higher rate tax relief, particularly where income tips over £100k.
The tax free dividend allowance, currently £2,000, will be reduced to £1,000 from April 2023, and will reduce further to £500 from April 2024. Dividends paid within an ISA are tax-free so consider moving income generating investment portfolio stock into an ISA, pending the CGT position, see below.
The capital gains tax free annual exemption, currently £12,300, is being lowered to £6,000 from April 2023, and then further lowered to £3,000 from April 2024. This will have an impact on anyone selling investment assets, like shares or property and will need some forward planning for anyone intending on disposing of assets. This make the tax-free status of stocks and shares ISAs more tax efficient and could be an opportunity to move shareholdings and portfolios into an ISA before the end of this tax year to take advantage of the bigger exemption, and then the tax-free status going forward.
The current National Insurance thresholds will remain until April 2028, and the current Employers Allowance of £5,000 will be retained for the moment.
The recent Stamp Duty Land Tax (SDLT) cuts from the Mini-Budget earlier this Autumn will remain in place until March 2025.
From April 2025, electric cars will start to become subject to Vehicle Excise Duty.
Company electric cars will see a rise in benefit in kind rate, increasing by 1% per year from April 2025. Although the incentive of buying an electric car in a company will still remain tax efficient in most circumtsances, careful planning needs to be done.
R&D tax credit relief for SMEs will see the additional reduction reduced from 130% to 86% and the credit rate will go from 14.5% to 10%. Measures will be introduced to tackle deliberate tax avoidance.
Business rates will be reviewed, although a revaluation of properties will be proceeding.
As always, there will be more detail to come and the devil is always in the detail.
Where there is change, there will always be opportunities for planning, so don’t forget to check-in with us on your upcoming plans before you make any committments in case of any impact on your tax liabilities.
