Image to represent personal tax | Randall & Payne
Category: Budget
Topic: Tax (Personal)

Autumn Statement: Changes to Personal Tax

Jeremy Hunt started by extending the freezing of many personal tax thresholds, inclusive of Income Tax, National Insurance (NICs) and Inheritance Tax for a further two years to April 2028. Given current levels of inflation, this will result in additional tax being paid by most individuals.

Furthermore the Autumn Statement reduces the generosity of certain other thresholds and allowances, including the Dividend Allowance, the Capital Gains Tax (CGT) annual exemption, and the threshold at which the Additional Rate (45%) of tax applies.

The tax free dividend allowance will be halved to £1,000 in April 2023, and then further reduced in April 2024 to £500. This means that an additional £1,500 of dividends will be taxable income, generating upwards of £3bn of tax by the 2027-28 fiscal year.

Also significantly cut is the Annual Exempt Amount for Capital Gains Tax. This will be more than halved to £6,000 in April 2023, and then halved again to £3,000 in April 2024. However, the reporting limit for proceeds has been set at £50,000 from April 2023, rather than the current limit of four times the AEA. This is expected to generate revenue of £1.6bn by 2027-28. In additional support to couples who are in the process of divorcing, no gain/no loss transfers are confirmed to be extended for three years following separation, which should allow for most settlements.

In the past few months, the additional rate of tax has been removed altogether, reintroduced, and now it has been announced that the threshold will be reduced from £150,000 to £125,140 in April 2023. This means that after you lose your entire personal allowance, you now also begin to pay Income Tax at a 45% marginal rate (39.35% for dividends) too. This reflects Hunt’s statement that those with more will contribute more towards the United Kingdom’s financial recovery, generating more than £3.7bn in the next five years.

In an effort to stimulate income for workers and combat low pay, rates of National Minimum and National Living Wages were increased by an average of 9.9%. With National Living Wage increasing for those over the age of 23 by 9.7% to £10.42. This represents an increase of over £1,600 to the annual earnings of a full time worker paid at this level, however many more workers on the lowest wages will have additional Income Tax and National Insurance Contributions due as a result in the aforementioned freezing of tax thresholds.

The Chancellor spoke significantly about compassion within his statement, including supporting those on fixed incomes and income support. Benefits will be uprated by September CPI, being 10.1%, and the triple lock has been honoured to include state pensions in this. The benefit cap and pension credit will also be uprated by CPI, enabling those on the lowest incomes will be protected from the effects of inflation on their incomes.

Stamp Duty Land Tax measures remain unchanged until 31 March 2025, with the nil rate threshold for all purchases at £250,000 and for first time buyers at £425,000. With the Office of Budget Responsibility predicting a fall in house prices of up to 10% over the next two years and mortgage interest rates continuing to increase, reducing these thresholds immediately could further stifle the housing market.

If you have any questions for our Tax experts as a result of this mini-Budget, please contact us on 01242 776000 or