Jeremy Hunt used the Autumn Statement in an attempt to calm markets and reset public finances with a series of tax rises achieved through cuts and freezes to allowances. In his first few days in office he had already reversed most of the measures announced in his predecessor’s September Mini Budget. But today he went further by cutting the CGT annual exemption, lowering the additional rate threshold to £125,140 and extending the freezing of other allowances by a further two years.
- Rates – Income tax rates for 2023/24 will remain at the basic, higher and additional rates of 20%, 40% and 45% respectively. The abolition of the additional rate of tax announced in the Mini Budget will not happen.The Scottish Government intend to hold their own Budget on 15 December, and this will determine the rates which will apply to Scottish taxpayers.
- Allowances and thresholds – The point at which additional rate tax becomes payable will be cut from £150,000 to £125,140 from 6 April 2023. This will mean that those already paying tax at 45% will pay an extra £1,243 in 2023/24. The Government forecast that approximately 250,000 individuals will pay some extra tax due to this measure.The personal allowance and basic rate band remain frozen at £12,570 and £37,700 respectively. This freeze of allowances has been extended by a further two years until April 2028. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.
- Dividends – The dividend allowance is to be halved 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 next year. The dividend tax rates for basic rate, higher rate and additional rate taxpayers will remain at 8.75%, 33.75% and 39.35% for both the current tax year and 2023/24. The 1.25% increase installed from the start of 2022/23 will not be reversed.
- There were no changes announced to pension tax relief. However, the reduction of the threshold for additional rate tax to £125,140 will see more high earners benefit from relief at 45% on their pension savings. Wage inflation may also mean that a pension contribution is a more attractive option for those who may otherwise lose out on child benefit or personal allowance.
- 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 the 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 their response in early 2023.
- There was no mention of any extension to the freeze to the lifetime allowance which is expected to remain fixed at £1,073,100 until April 2026.
- The increase to NI to help pay for social care reforms has been scrapped. The additional 1.25% which was added to the rates of NI for 2022/23 for employees, employers and the self-employed has been removed from November 2022.
- NI thresholds will be fixed at the current 2022/23 levels. The changes to the thresholds at which individuals (both employed and self-employed) start to pay NI, which were introduced in July 2022, will remain – i.e. they’re kept in line with the annual personal allowance of £12,570.
Capital Gains Tax
- The chancellor announced that the CGT annual exemption would be cut from £12,300 to £6,000 from April 2023, and to £3,000 from April 2024. Based on 2021/22 figures an estimated extra 235,000 individuals will need to file a self-assessment return in 2023/24 as a consequence.
- There was no change to the rates of CGT and these will continue to be 10% and 20% (18% and 28% respectively for gains on residential property).
- The freeze on both the nil rate band (NRB) and residence nil rate 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 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 that they pay less than the main rate.