The recent Autumn Statement was packed with tweaks designed to boost the Treasury, funded by the taxpayer.
These tweaks in the Autumn Statement will be felt by a wide range of people, including those who have accumulated wealth, those on lower and higher incomes and those approaching retirement.
Here are some of the key announcements made by the Chancellor Jeremy Hunt:
Income Tax
Well before the Autumn Statement was announced, as expected, the personal allowance (the amount you can earn before you start paying income tax) remains at £12,570.
The amount people will have to earn before they pay income tax at 40% remains at £50,270 and will remain at this level until April 2028.
The Chancellor has reduced the amount you can earn before paying the additional rate of income tax of 45% from £150,000 to £125,140.
With the rate of annual pay growth at 5.4%, this is the strongest growth in regular pay seen outside of the pandemic period and the freezing of the personal allowance will mean more tax to be paid.
Even those working part time or on minimum wage may see with the rise in minimum wage, their income being taxed.
Someone with an average UK (United Kingdom) salary of £33,000 will pay almost £2,600 more Income Tax thanks to the freeze.
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Although it means the Government avoid breaking their manifesto promise not to raise the headline rate of VAT (Value Added Tax), NI (National Insurance) or Income Tax, this still amounts to a sizeable tax rise by stealth.
National Insurance Contributions
The Chancellor confirmed National Insurance contributions from 6 April 2023 will continue at their current rates.
Capital Gains Tax.
The tax-free allowance for Capital Gains Tax had already been frozen until 2026, but the Chancellor has now opted to cut the allowance.
The government’s estimates published suggest the CGT reforms alone will raise around £440 million a year by 2027/28, highlighting the massive scale of this tax raid on client wealth.
It will see the current £12,300 allowance cut by more than half to £6,000 from next April, and then again to £3,000 in April 2024. The move will mean that investors will pay an extra £25 million in tax from next year and another £275 million the year after.
Those selling a house or flat that is not their main residence will face an even bigger hit courtesy of the 18% and 28% rates on property for basic and higher rate taxpayers.
Anyone who has not used their current Capital Gains Tax allowance could consider cashing in gains before the tax-year end in April
Inheritance tax
The inheritance tax threshold will be kept at the existing level of £325,000 until April 2028.
State pension
The ‘triple lock’ will still apply to State pensions.
The consumer price index (CPI) was 10.1% in September 2022 which was greater than 2.5% and the increases in earnings so the new and basic rate pension will increase by 10.1%.
This means the New State Pension for someone with a full National Insurance contribution record will increase from £185.15 per week to £203.85 per week.
The Basic State Pension for someone with a full National Insurance contribution record will increase from £141.85 per week to £156.20 week.
The age state pension is paid is legislated to increase over the next 25 years. There will be a review of this published in 2023 which will consider whether the existing timetable remains appropriate.
Lifetime allowance
The lifetime allowance stays at £1,073,100 for 2023/24.
This is the amount you can build up in a pension fund without incurring a tax charge.
Annual allowance
The annual allowance stays at £40,000 for 2023/24.
The is the maximum amount you can pay into a pension fund and still benefit from tax relief.
ISA’s
The adult ISA (Individual Savings Accounts) annual subscription limit for 2023/24 will remain unchanged at £20,000.
The junior ISA annual subscription limit for 2023/24 will remain unchanged at £9,000.
