Autumn Statement 2022. Taxes Up. Spending Down.

Sunday sees the start of Football World Cup. Yesterday, Jeremy Hunt, the new Chancellor of just 35 days, promised to score a few goals of his own with the government’s three priorities; stability, growth and public services. In doing so, he declared £55bn in tax increases and spending cuts to bring stability to the UK’s finances.

A few weeks ago, we saw market turmoil on the back of the then UK Prime Minister, Liz Truss’ Growth Plan. This turned into a series of own goals, ultimately ending with Liz and her Chancellor both being red carded. Stock and bond markets have this time barely moved in reaction to Jeremy Hunt’s plan. Whilst Sterling (not the England footie player) which took out the 1985 all time low against the US dollar, has since recovered by around 10%, and only slipped slightly on today’s announcements.

There were a number of tax changes announced that will impact Wealth clients – some expected and some unexpected.

For a start, income tax allowances and tax bands will be frozen for a further 2 years until April 2028. This form of tax increase, called fiscal drag, brings more people into the tax net, increasing the amount of tax people pay. NI thresholds will also be frozen. Both are particularly effective from a government viewpoint.

However, clients with high incomes who pay income tax at 45%, will do so from £125,140 (down from £150,000)  from April 2023. No changes were made to the rates of income tax.

In an unexpected change, both the dividend allowance and the capital gains tax annual exemptions will be cut in half from next tax year, and then in half again for the following tax year. The dividend allowance is currently £2,000 and the capital gains annual exemption, £12,300. Next tax year these will be £1,000 and £6,000 respectively, and the year after just £500 and £3,000. There were however no changes made to the rates of capital gain tax.

Pensions and ISAs weren’t mentioned at all. But bear in mind there’ll be a Budget in the Spring of 2023, and we could yet see pension and ISA allowances frozen for an extended period of time too. Or perhaps more radical changes to pensions could still be on the cards.

The inheritance tax nil rate band and residential nil rate band did however receive an extension to the freeze of their current values of £325,000 and £175,000, again until April 2028.

The previously announced cuts to stamp duty land tax also remain until March 2025, a spot of good news for clients looking to help children with first time property purchases.

Finally, if you’ve already made the leap to driving an electric car, the Chancellor announced that from April 2028, they’ll no longer be exempt from road tax.

Read our comprehensive guide to the highs and lows of the 2022 Autumn Statement HERE.