The Autumn Statement 2022
Head of Tax, Mark Routen, had this to say about the updated Autumn Statement 2022:
Jeremy Hunt (pictured below) unveiled his autumn statement, bringing in tax rises and spending cuts as predicted.
The increases in tax
- Stealth tax methods of freezing thresholds will bring some of the poorest into the tax net
- These methods will increase the number of people paying higher rates of tax
- These rises are used as they do not look like tax rises in the short term, however, the impact is felt down the road
For example, more people are being dragged into higher-rate tax bands because the thresholds remain fixed while wages rise. Over the past 20 years, average wage growth has been around 3% per year. Ultimately, if thresholds remain frozen for a number of years, then you will end up paying considerably more tax
The Centre for Business and Economics Institute estimates that a two-year extension to the freeze will drag 2.2 million extra taxpayers into higher rates of tax. If wage growth is 3% per year for the next five years but income tax thresholds remain frozen, then a worker on £70,000 today will be £2,002 worse off in the 2028-29 tax year.
The chancellor set out two new fiscal rules:
- The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period
- The second is that public sector borrowing, over the same period, must be below 3% of GDP
Personal tax
- As mentioned above, the 45% threshold is reduced to £125,140, dragging more people into the band
This may not result in an increased tax take as it removes the incentive to earn more or work.
- Personal allowances, national insurance bands, and inheritance tax threshold are fixed until 2028, creating the fiscal drag discussed above.
- The dividend allowance is reduced from £2,000 to £1,000 next year and then £500 the year after.
- The Capital gains tax allowance is reduced from £12,300 to £6,000 next year and then £3,000 the following year.
This will have a significant impact on investments going forwards and reduce the incentive for people to invest in small company shares.
- From 2025 Electric cars taxed are to be subject to vehicle excise duty. However, company electric cars will still attract tax benefits.
- SDLT will remain reduced until 2025.
Corporate Taxes
- The VAT registration threshold will remain the same until 2026, bringing more companies and businesses into the charge to VAT
- R&D incentives are cut going forward
- Windfall Taxes are to be increased on oil and gas profits from 25% to 35% and introduced on green energy storage
- It should also be remembered that corporation tax has already been increased by nearly 33% to 25%
For more tax information or to speak to a tax or investment specialist, get in touch today.
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