On 17 November the Chancellor, the fourth one this year, stood up in parliament and delivered his Autumn Statement.
Much of what was stated, had been, to some degree, expected. Once again there was a focus on ‘stealth taxes’, namely, either the further freezing of allowances, such as the Personal Allowance and the threshold for higher rate tax, or a reduction in other allowances like the Dividend Tax Allowance and Capital Gains Tax exemption level.
Only time will tell whether, taken together with the tax reversals announced since Kwasi Kwarteng’s Growth Plan, the decisions in this Autumn Statement will ensure debt as a share of GDP is on a sustainable path and the projected £55 billion consolidation achieved in 2027-28.
The Government is increasing benefits in line with inflation, measured by September Consumer Prices Index (CPI) which was 10.1% this year. It’s claimed that around 19 million families will see their benefit payments increase from April 2023. This includes increasing the State Pension by inflation, in line with the commitment to the Triple Lock. The standard minimum income guarantee in Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth).
The benefit cap will also be raised by 10.1%, meaning more households will see their payments increase due to uprating from April 2023.
Some disability benefits are devolved in Scotland, therefore it’s for the Scottish Government (SG) to decide the level of uprating for those benefits. As the Department for Work and Pensions (DWP) benefits are fully devolved in Northern Ireland, it’s for the Northern Ireland Executive to decide the level of uprating.
It was also mentioned that there is currently a Review of the State Pension age being carried out as to whether the existing timetable remains appropriate. This is expected to be published in early 2023. It’s inferred the review will carefully balance important factors, including fiscal sustainability, the economic context, the latest life expectancy data (it will be interesting to see if any allowance is actually made for the impact of Covid) and fairness both to pensioners and taxpayers.
An increase in the freezing of the Personal Allowance of £12,570 until April 2028.
Income tax thresholds are also to remain at their current levels until April 2028. The exception to this is the additional rate threshold which is to be reduced from £150,000 to £125,140 from April 2023.
The tax bands announced will for non-savings and non-dividend income apply to taxpayers in England, Wales, and Northern Ireland and for savings and dividend income will apply UK-wide.
The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
The Married Couple’s Allowance will be valued at between £4,010 and £10,375 and the Blind Person’s Allowance will be valued at £2,870.
Reduction in the additional rate tax threshold and some implications
The decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023 and the fixing of other personal tax thresholds within income tax, may have implications for certain individuals.
Those who find themselves with an Annual Allowance charge liability will, for non-Scottish taxpayers, have the charge calculated as follows.
Any chargeable amount is added to the individual’s reduced net income for the tax year and the chargeable amount:
- over the higher rate threshold is taxed at 45%
- over the basic rate threshold but below the higher rate threshold is taxed at 40%
- below the basic rate threshold is taxed at 20%.
Therefore, any reduction, or lack of increase, in the tax thresholds could lead to an increase in the Annual Allowance charge due.
The Annual Allowance charge applies in the same way for individuals who are Scottish taxpayers, except that the rates and the points at which they apply can differ for a Scottish taxpayer and this can mean the charge comprising up to four rates.
On a similar basis, the recipients of certain pension death benefits may find themselves with a higher tax charge where the death benefits are chargeable to income tax in the hands of the recipient.
Capital Gains Tax
The Capital Gains Tax Annual Exempt Amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
National Insurance contributions thresholds
The National Insurance contributions (NICs) Upper Earnings Limit and Upper Profits Limit are already fixed at £50,270 until April 2026 and will now be maintained for an additional two years until April 2028.
The NICs Primary Threshold and Lower Profits Limit (LPL) will continue alignment with the Personal Allowance of £12,570 and will be maintained at this level from April 2023 until April 2028.
The Class 2 Lower Profits Threshold will also be fixed from April 2023 until April 2028 to align with the LPL.
The Lower Earnings Limit will remain at £6,396 (£123 per week) and the Small Profits Threshold will also remain unchanged at £6,725 per annum.
Class 2 and Class 3 NICs will be £3.45 per week and £17.45 per week respectively.
The Inheritance Tax nil rate bands will stay fixed at £325,000 and the residence nil rate band at £175,000 until April 2028. The residence nil rate band taper will continue to start at £2 million.
The Lifetime Allowance for pensions remains frozen at £1,073,100 until 2025/26 tax year end. Despite various predictions, there was no extension to the timescale.
Stamp Duty Land Tax
On 23 September 2022, the Government increased the nil rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000. The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. This will now be a temporary SDLT reduction. The SDLT cut will remain in place until 31 March 2025.
The Government is giving local authorities in England additional flexibility in setting Council Tax by increasing the referendum limit for increases in council tax to 3% per year from April 2023. In addition, local authorities with social care responsibilities will be able to increase the adult social care precept by up to 2% per year.
Vehicle Excise Duty
Vehicle Excise Duty will apply on electric cars, vans and motorcycles from April 2025.
National Insurance contributions Secondary Threshold
The Government will fix the level at which employers start to pay Class 1 Secondary NICs for their employees (the Secondary Threshold) at £9,100 from April 2023 until April 2028.
The Energy Profits Levy
This will be increased by 10 percentage points to 35% and extended to the end of March 2028, and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by low-carbon electricity generators. So far, there seems to be no indication as to how long the ‘temporary’ measure will last.
This measure will remove tariffs on over 100 goods for two years to help put downward pressure on costs for UK producers. The measure will remove tariffs as high as 18% on goods ranging from aluminium frames used by UK bicycle manufacturers to ingredients used by UK food producers.
The VAT registration and deregistration threshold at £85,000 will not change for a further period of 2 years from 1 April 2024.
The Government is investing a further £79 million over the next 5 years to enable HMRC to allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers. The Government remains committed to ensuring HMRC has sufficient funding to enable it to maintain its compliance performance over time, while continuing to make efficiencies, both in this and future Spending Review periods.
Depending on which side of the political fence you stand, the Autumn Statement’s focus on stability, growth and public services will either be seen as a positive, or as Rachel Reeves the Shadow Chancellor said “… this isn’t a game, this is about peoples' lives, this is about peoples' livelihoods”.