How will the Chancellor’s autumn tax changes affect your personal tax liability?

In his autumn statement, Chancellor Jeremy Hunt made it clear that everyone will be paying “a bit more tax” to help bring down inflation and get the economy back on track. Senior Tax Consultant Robert Redfern examines the personal tax changes announced in the Chancellor’s statement.

The main changes that will affect individuals are:

Income tax additional rate threshold reduced

The threshold for paying the 45% additional income tax rate (39.35% for dividends) is being reduced from £150,000 to £125,140 from April 2023.  

Income tax thresholds frozen

The autumn statement confirmed that the planned income tax basic rate reduction to 19% from April 2023 would not go ahead.

Basic rate income tax is currently paid on income over £12,570, and the higher rate of 40% applies to income over £50,270. These thresholds are being frozen until at least 2027/28. Given the current rate of wage inflation, many people will find themselves paying higher rate income tax in the coming years.  

National Insurance Contributions (NIC) thresholds frozen

Similarly, the threshold at which employers begin to pay Class 1 NIC for their employees will remain at £9,100 from April 2023 until April 2028. The government expects this to raise £3bn in 2023/2024 and £5bn a year thereafter.

The primary threshold over which an employee pays NIC will remain at its current level, £12,570, until April 2028.

Inheritance Tax threshold frozen

The threshold below which no Inheritance Tax is payable (Nil Rate Band) will remain at £325,000 until 2027/28 (the rate it has been at since April 2009). In real terms, inflation is eroding this benefit year after year.  

Dividend allowance reduction

The current tax-free dividend allowance of £2,000 per year is being reduced to £1,000 from 6 April 2023 and further reduced to £500 from 6 April 2024.

Capital gains tax allowance reduced

The annual exempt amount for Capital Gains Tax (CGT), currently £12,300, will decrease to £6,000 in 2023/24 and to £3,000 from 2024/25.

Stamp duty land tax (SDLT) nil-rate threshold

The threshold above which SDLT is payable (except for first-time buyers) was increased in last year’s ‘mini-Budget’ from £125,000 to £250,000 for purchases of residential property in England and Northern Ireland. This increase will cease on 31 March 2025. After this date, SDLT will be payable on all purchases over £125,000.

From the same date, the nil-rate threshold for first-time buyers will revert to £300,000 (from £425,000) and the maximum purchase price for which first-time buyers’ relief can be claimed will revert to £500,000 (from £625,000).

Road tax for electric vehicles

Electric cars, vans and motorcycles will be subject to Vehicle Excise Duty in the same way as petrol and diesel vehicles from April 2025.    

Tax planning opportunities

There may be planning opportunities to mitigate the effect of some of these measures, and we would welcome a discussion with you to see what steps can be taken.

If you would like to discuss your personal tax planning, please contact Robert Redfern at robert@sandersgroup.co.uk.

Please note, the content of this article is for information purposes only and should not be relied upon as formal advice.