Coming just two months after the ill-fated “mini-Budget” in September, it was perhaps predicted that the Autumn Statement contained no big surprises. Many of the main measures had been pre-announced in the lead up to the Statement, although there were a few areas where the changes went further than had been expected, and other areas where the tax increases were perhaps not as severe as had been feared.
Probably the main theme was a freezing of thresholds, thereby increasing future tax takes without increasing tax rates. The Income Tax and National Insurance thresholds which were already fixed at their current levels until April 2026 will now be maintained for an additional two years until April 2028. Similarly, the inheritance tax nil rate bands were already set at current levels until April 2026 and will now remain at these levels for a further two years until April 2028.
The exception, however, was the reduction in the threshold where Additional Rate Tax starts to be paid. From 6 April 2023, this will be lowered from the current £150,000 to £125,140, bringing many more taxpayers into the very top rate of tax. Some had predicted a change in the rate itself, maybe back to 50%, but that didn’t happen, and the top rate remains at 45%, or 39.35% on dividends.
There will be a reduction in the amount of dividend that can be received tax free. This is currently £2,000 but will reduce to £1,000 from April 2023 and to £500 from April 2024.
There will similarly be a reduction in the amount of tax-free capital gains. As of 6 April 2023, the annual exemption will be more than halved, dropping from the current £12,300 to £6,000. It will then drop further still to £3,000 with effect from 6 April 2024. For trustees, the maximum annual exemption available to them will be £3,000 for 2023/24 and £1,500 for 2024/25, but depending on the number of trusts created by the settlor, this could drop to as little as £600 for 2023/24 and £300 for 2024/25, per trust.
From a tax perspective, this felt like a bit of a “steady as she goes” Autumn Statement, which after the turbulence of recent months, was perhaps to be expected!
If you’d like any further tax advice or guidance, get in touch with your usual BHP contact or call 0333 1237171.
