In yesterday’s Autumn Statement, Chancellor Jeremy Hunt delivered a package of tax rises and spending cuts designed to repair Britain’s battered public finances.Promising to protect the vulnerable and concentrate tax rises on high-earning individuals, the chancellor warned the UK economy had already entered recession, and that things would get worse before they improved.

Here is a summary of the key measures likely to affect your own personal finances:

Freeze to income tax thresholds extended 

The freeze on the personal allowance, and thresholds for income tax and National Insurance will be extended to April 2028. The freeze on these taxes had been due to lift in 2025-26. With thresholds failing to rise in line with salaries, a significant number of people may end up in a higher tax band by the end of this period.

Inheritance Tax

The inheritance tax (IHT) threshold has also been frozen. The ‘nil-rate band’ – the amount that can be passed on before IHT is due at a rate of 40% – will stay at its current rate of £325,000 until April 2028.

Hunt says, even with this freeze, ‘we’ll still have the most generous set of tax free allowances of any G7 country’.

Inheritance tax planning

Additional-rate tax threshold reduced

The additional-rate income tax threshold will reduce from £150,000 to £125,140 from April 2023. It’s estimated around 250,000 taxpayers will be pushed into this higher tax band, paying 45% on any income above the new limit. This would mean anyone earning £150,000 or more could expect to pay £1,200 more per year in income tax.

State pension triple lock reinstated

The Chancellor confirmed pensioners would receive a 10.1% increase, in line September’s inflation – a formula outlined in the state pension triple-lock guarantee.  This means that payments are increased each year by whichever rate is the highest of either average earnings, the Consumer Prices Index (CPI) inflation, or 2.5%. In addition, those claiming working-age benefits (such as Universal Credit) and pension credit will see payments increase by 10.1%.

Cuts to dividend tax and capital gains tax allowances

The dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 in April 2024. This is likely to affect those who own shares in a company and receive dividends as a regular income. Dividends from funds and investment trusts are also subject to dividend tax.
The government also announced that the capital gains tax (CGT) allowance will be slashed to £6,000 in 2023-24, down from £12,300. The allowance will be cut again in 2024-25 to £3,000. This will affect those liable to pay CGT on profits made from selling an asset – such as a second property or valuable possession.


Electric Vehicle Excise Duty

The Chancellor announced that vehicle excise duty will be rolled out to apply to electric vehicles for the first time, a move that will come into force from April 2025. As electric car ownership becomes more popular, the government has reportedly been missing out on the revenue generated from the road tax and fuel duty that are currently only paid by petrol and diesel car owners.

Other Key Points

The stamp duty cuts announced in September’s mini-budget will remain in place until 31 March 2025, and will then be removed. Until this date, first-time buyers won’t need to pay stamp duty on the first £425,000 of the property they buy (up from £300,000); existing homeowners won’t have to pay on the first £250,000 (up from £125,000).The National Living Wage, currently £9.50 for workers over 23, will also rise by just under £1 to £10.42 from April 2023.

In Summary

Upcoming changes to the Dividend Allowance and the Capital Gains Tax Annual Exempt Amount, as well as Income Tax on the highest earners will all have a significant impact on many of our clients.Many of you with capital that you want to preserve for the benefit of yourselves and your family might now need extra support to understand how today’s changes impact your personal financial situation.We want to remind you that our team is here to help you navigate the UK’s labyrinthine tax system and help minimise your exposure to tax. 

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Capital at risk. Sources: Which? and AJBell InvestCentre