With inflation rising and following the financial markets’ reaction to the not-so mini, mini-budget, Chancellor Jeremy Hunt’s Autumn Statement had to build global confidence in the UK economy once more. Put crudely, the tax-take had to increase and expenditure needed to decrease. At least the incumbent Chancellor couldn’t do any worse than his predecessor…
After the failed tax give-away, it had been widely accepted that taxes must rise to prevent further disruption to the UK economy and Mr Hunt outlined in his speech that higher taxes would limit the (far-worse) damage of inflation. However, that remains to be seen.
So after weeks of speculation, including whether the non-domicile regime would be targeted (spoiler-alert: it wasn’t), the key changes to UK tax policy announced today (and effective from 6 April 2023) that we feel will affect our clients are:
- The threshold at which the additional rate of tax (45%) will be paid has been decreased from £150,000 to £125,140. You will recall that the additional tax rate was controversially abolished just 8 weeks ago…
- The tax-free dividend allowance will be reduced from £2,000 to £1,000 per annum. This will be reduced further to £500 per annum from 6 April 2024; and
- The tax-free CGT or Capital Gains Tax Allowance (known as the Annual Exempt Amount) will be reduced to £6,000 from £12,300 and reduced to £3,000 per annum from 6 April 2024.
There will be no changes to any other personal tax thresholds until 6 April 2028 at the earliest. This has been dubbed a stealth tax as this should affect pay rises only, but will hamper the power of salary increases when battling inflation. CGT rates will also remain the same, rather than increase in line with the Income Tax rates as had been mooted, not for the first time in recent years.
We expect there to be some relief amongst our clients that the Autumn Statement did not contain any rushed and ill-thought-out tax policies, especially to the “non-dom” regime. However, with an election on the horizon and non-doms being a notable target for the Opposition, changes to the non-dom regime may not be too far away.
If you would like to seek advice on your tax affairs please contact us: