by David Watkinson
Hopefully, after the Autumn Statement, the government will now have settled down on what our future taxes and benefits will be.
Much of what the Chancellor announced had already been briefed, so what are the main provisions:
Firstly, the main provisions in respect of Income Tax are as follows:
- The Personal Allowances remain frozen next year, and for future years until April 2028, at £12,570. By law, allowances increase in line with inflation unless the government takes action to stop them. Since April 2019 the allowance has only increased by a total of £70 from £12,500 in 2018/19. Had the government not taken the decision to freeze them in all but one year since, the allowance would be approximately £14,520 in the current year, increasing to approximately £15,970 next year. At the basic rate of 20% this means that a basic rate taxpayer will be paying over £13 per week more in tax next year than they would have been paying had allowances been allowed to increase by their default amount.
- The Basic Rate Band will remain at £37,700. The Higher Rate Band, however, will be reduced by £25,000 resulting in the Additional Rate becoming payable next year at a total income of £125,000 rather than £150,000 at present. This reduction will result in someone earning £150,000 paying additional tax of £24 per week.
- Similarly, the National Insurance Bands will be frozen until 2028.
- However, the tax free Dividend Allowance will be reduced from the current level of £2,000 to £1,000 in April 2023 and £500 in April 2024.
- All Income Tax Rates and National Insurance Rates will be frozen at the current rates for next year.
Taking all of the above into account, the Chancellor said that someone fortunate enough to earn £150,000 per annum will be paying just over £1,000 per month more in tax and national insurance.
Secondly, the Capital Gains Tax Allowance, £12.300, will be halved to £6,000 from April 2023, and further reduced to £3,000 in April 2024. The Capital Gains Tax Rates remain frozen at current rates. These are 10% for basic rate taxpayers and 20% for higher rate taxpayers for assets except residential property. The rates on gains from the transfer of residential properties are 18% and 28% respectively. Business Asset Disposal Relief remains unchanged.
Thirdly, the Inheritance Tax Allowance will be frozen at the current level of £325,000 until April 2028. The rate on Inheritance Tax charged on the value of estates above this level remains at 40%.
Fourthly, the turnover above which a business must register for Value Added Tax will be frozen at the current level of £85,000 per annum until April 2026. With inflation at 10.1% this is effectively a decrease in the registration threshold in excess of £8,000 meaning that many more SME’s will be dragged into VAT.
There were a number of other announcements made including a reduction in tax relief on Research and Development expenditure. However, no announcement was made concerning the rate of Corporation Tax, meaning that the increase in April 2023 from 19% to 25% for businesses with taxable profits in excess of £250,000 will be implemented. Businesses with taxable profits below £50,000 will remain at 19%, with marginal relief being applicable for profits between £50,000 and £250,000.
Finally, there were a number of non-tax announcements made, including:
- The pension triple-lock being maintained, resulting in the basic state retirement pension increasing by 10.1% to £10,600.
- Similarly, other state benefits will increase by 10.1%. However, additional resources will be made available to counter fraud, and to provide training and coaching to improve claimants earning capabilities.
- Continuing help to households to meet energy costs, additional cost of living payments for pensioners and people on benefits.
- An increase in the hourly minimum wage of 9.7% in April 2023 from £9.50 at present to £10.42 per hour.
The Chancellor himself said that his Autumn Statement would be “eye-watering”. It has proven to be so!
WatkinsonBlack have considerable experience in all areas of taxation and business services. This includes providing a very cost-effective payroll bureau service, as well as assisting to ensure compliance with the latest Making Tax Digital legislation. If you are employed or self-employed either as a sole trader, partnership or limited company and want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us by telephone on 01925 413210 or by e-mail to [email protected]. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
