It was just 2 months ago since the mini budget, the former Chancellor Kwasi Kwarteng branded it a budget for growth, however as we all know it caused one of the biggest fallouts in UK financial markets for decades. The unfunded tax cuts and increased spending has been turned on its head with the latest Autumn Statement, in an effort to bring calm to financial markets and improve the government debt pile.
This was a budget where there was no rabbit out of the hat moment for the Chancellor to bring cheers. It was a rather downbeat affair, however, there were some pockets of good news, with inflation linked increases to the state pension, minimum wage and state benefits.
There was also some relief at the help for energy costs which will be extended, albeit at a lower rate from April 2023.
One announcement that did stand out for us was the cut to Capital Gains Tax (CGT) allowances which will reduce from the current £12,300 to £6,000 in 2023 and then reduce further to £3,000 from April 2024.
It highlights the emphasis to ensure the portfolios we run are as tax efficient as possible and we maximise your CGT allowances as much as we can. This will only apply to those who hold a unit trust investment where CGT will be applicable.
Furthermore, the dividend allowance currently £2,000 will be reduced from April 2023 to £1,000, then will halve to £500 from April 2024.
Whilst there were no income rate tax increases, the allowances were not increased ensuring that more of the population either start to pay tax or pay more. Below is a table to reflect the changes from April 2023 for England, Wales and Northern Ireland.
| Tax Band | Current Income Threshold | From April 2023 Income Threshold | Tax Rate |
| Personal Allowance | First £12,570 earned | Frozen until 2028 | 0% |
| Basic Rate | £12,571 to £50,270 | Frozen until 2028 | 20% |
| Higher Rate | £50,271 to £150,000 | £50,271 to £125,140 | 40% |
| Additional Rate | Over £150,000 | Over £125,140 | 45% |
Taking the above figures into account means that someone on the average UK salary of £33,000 will pay almost £2,557 more income tax between now and 2028.
For those of you who have your own business, there is the increase in corporation tax from 19% to a lofty 25% (on profits in excess of £250,000) from 1st April 2023, whilst not in this budget it was announced by the Chancellor a few weeks back which is a significant hike in additional taxation on companies.
The Inheritance Tax (IHT) main bands – Nil-Rate Band (£325,000) and Residence Nil-Rate band (£175,000) will remain frozen until April 2028. According to Office of Budget Responsibility (OBR) a move which is estimated to net more than an additional £1 billion for government by the 2027/28 tax year.
With the increase in asset values over the past few years we are finding more and more clients are being caught in the IHT trap. However, there are a number of solutions to meet the needs of our clients and to reduce the tax burden for their families.
Below is an outline of the main points of the budget.
- Personal tax, the threshold at which the 45p rate becomes payable drops from £150,000 to £125,140. Those earning £150,000 or more will pay just over £1,200 more a year.
- The annual exemption amount for CGT will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
- ISA allowances will remain the same, £20,000 and £9,000 for junior ISAs (under 18).
- From April 2025, electric cars will no longer be exempt from Vehicle Excise Duty.
- On windfall taxes, from 1 January until March 2028 will see increases to the energy profits levy from 25% to 35%.
- Stamp duty cuts will stay in place until March 2025.
- While the employers’ national insurance contributions threshold is frozen until April 2028, the employment allowance will be retained at its new, higher level of £5,000 until March 2026.
- From April, the government will continue the Energy Price Guarantee for a further 12 months at a higher level of £3,000 per year for the average household.
- Additional cost of living payments next year of £900 to households on means-tested benefits; £300 to pensioner households and £150 for individuals on disability benefit.
- The Minimum Wage will rise from April 2023, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 to a full time worker.
- For all of you receiving your state pension there is very good news, following weeks of uncertainty the triple lock will be honoured, in April, the state pension will increase in line with inflation, an £870 increase.
- To ease the inflationary pressure on poorer households there will be additional cost of living payments. The government will provide households on means-tested benefits with an additional £900 cost of living payment in 2023/24. Pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150.
We hope this has been informative and not too sobering a read as we approach the festive season. At least the planned increase in alcohol duty has been delayed until April 2023 when it is due to be increased by 12.6%, which incidentally is the biggest increase since 1643 when the duty was first brought in, so stock up now!
As always if you have any questions, queries or concerns then please contact us and we will be happy to discuss.