Autumn Statement 2022: stealth taxes and spending cuts

Posted: 18/11/2022

Yesterday the Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement and set out the government’s latest plans to reduce public spending and plug the gap in the UK’s finances. While it is clear one of the objectives of the Autumn Statement was to try and recover stability in the markets, as ever it was interesting to note the issues that were not addressed.

Following the previous ‘fiscal event’ on 23 September and the subsequent ‘emergency statement’ on 17 October, which witnessed the introduction and then reversal of numerous tax cuts, it had been widely anticipated that this Autumn Statement was going to lead to more people paying more tax.  This is primarily being achieved by freezing rates and lowering allowances and thresholds.

The chancellor announced a reduction of the threshold above which the highest earners will pay the additional rate of income tax, currently 45%. From 6 April 2023 the 45% rate will be paid by those who earn £125,140 or more, whereas currently the threshold is £150,000.

Continuing with personal taxes, the chancellor confirmed that the current income tax bands will be frozen until 2028. As wages rise, but tax bands remain static, more people will move into higher tax brackets and the tax burden will increase. However, the chancellor stated that even after these changes, the UK “will still have the most generous set of tax-fee allowances of any G7 country”.

The capital gains tax (CGT) annual exempt amount will be reduced from £12,300 to £6,000 from April 2023, and then to £3,000 from April 2024. We assume (but are awaiting confirmation) that a similar reduction will be made to the annual exempt amount of trustees, which is usually half that available to individuals. This change goes beyond the expected freezing of allowances from the chancellor, although there is uncertainty as to how much additional revenue will be generated. 

Importantly, the rates of CGT will remain the same, at 10% (income dependent) for basic rate taxpayers (18% on residential property), and 20% for higher rate taxpayers (28% for residential property). 

The dividend allowance will also be reduced from £2,000 to £1,000 from April 2023, and then to £500 from April 2024. This alteration to the dividend allowance and CGT annual exempt amount may drive investors towards more tax-efficient arrangements such as ISAs and pensions, to benefit from tax-free returns, as well as prompting a move away from disposals of investments each tax year to make use of the annual exempt amount.

Inheritance tax (IHT) was briefly touched upon, but only to confirm that the IHT tax-free threshold, also known as the nil-rate band, will remain at £325,000, and the residence nil-rate band will also remain at £175,000. Both of these bands will be frozen until 2028. Otherwise, the IHT regime remains unchanged for now.

The reductions in stamp duty land tax (SDLT) announced in September 2022 will remain, but only until March 2025. Therefore, the threshold at which SDLT becomes payable remains at £250,000. The threshold for first-time buyers’ relief also remains at £425,000 and the maximum value of a property on which first time buyers’ relief can be claimed will remain at £625,000. The bands will return to their previous levels in 2025, but this falls after the next general election.

The reversal of the increase to the rate of National Insurance remains and the National Insurance threshold has also been frozen for a further two years until 2028.

Left unsaid

While there are some newsworthy tax changes in the 2022 Autumn Statement, particularly in relation to the shifts in personal tax thresholds (both for income tax and capital gains tax), certain issues were not covered. Some of the main areas excluded are:

• There was no further consideration of corporation tax, nor diverted profits tax, hence indicating that the headline rate will increase from 19% to 25% and 25% to 31% respectively.
• There were no further changes to the SEIS, EIS, VCT, CSOP or capital allowance reforms initiated by the ‘fiscal event’ and confirmed in the emergency statement, thereby indicating that these measures will remain.
• An interesting omission has been in relation to tax simplification. Kwasi Kwarteng had announced the abolition of the Office of Tax Simplification (OTS) and that responsibility for simplifying the UK tax system would rest with the legislature, HM Treasury, and HMRC. There was no further discussion or mention of tax simplification or indeed the future of the OTS, although professional bodies have been arguing for its reinstatement.
• There were no changes announced to the taxation of non-resident or non-domiciled individuals, other than an anti-avoidance measure regarding exchanges of shares in closely-held UK companies for shares in closely-held non-UK companies. There was some speculation that the remittance basis of taxation for non-UK domiciled individuals may be tinkered with in the Autumn Statement, as the Labour party has been arguing heavily for its abolition. Given the complexities and politics involved, we would expect that no changes to the taxation of non-UK domiciled, or non-UK resident individuals would be made without a formal consultation.

If you have any questions or concerns about the impact of the Autumn Statement upon your affairs, please contact us. We will be happy to advise.

This article was co-written with Karl Leesi, paralegal in the private client team. 

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