Last week saw the current Chancellor, Jeremy Hunt, deliver the much-awaited Autumn Statement. There had been significant speculation around the tax rises and spending cuts that this statement would potentially bring, and it is fair to say that there were few surprises in what was announced. Here is a short summary of the important tax changes for clients;
Tax bands and allowances have been frozen which is very much a stealth tax, and many of these thresholds have already been frozen until 2026 and these freezes will remain for at least another two years – this includes:
- Basic and Higher Rate Income Tax Bands frozen at £12,570 and £50,250 until April 2028
- National Insurance Rate Bands frozen at the current rates
- Inheritance Tax Nil Rate Band frozen at £325,000 per individual until April 2028
The Additional Rate income tax band is to be reduced from £150,000 to £125,140 from April 2023 meaning that earnings above this amount will be subject to the 45% tax rate.
Of particular interest to many clients is the Capital Gains Tax allowance which will be reduced from April 2023 from £12,300 to £6,000 and then £3,000 from April 2024, whilst the dividend tax allowance will also reduce next April from £2,000 to £1,000 and then £500 in April 2024. This means that those receiving dividends which are not “wrapped” in an ISA or a Pension will potentially see increased taxation over the coming two years.
For business owners, the corporation tax rate will increase to 25% from 1 April 2023, affecting companies with profits of £250,000 and over. Small companies with profits up to £50,000 will continue to pay corporation tax at 19%, with profits between these two figures being subject to a tapered rate.