Press release

Chancellor raises personal taxes through threshold changes

17 November 2022

Rachel McEleney, associate tax director at Deloitte, said:


Capital gains tax (CGT) annual exemption cut to lowest level since 1996

“The Chancellor announced today that the CGT annual exemption for individuals will be reduced from £12,300 to £6,000 from 6 April 2023, its lowest level since 1996. It will then be reduced further to £3,000 from 6 April 2024. This will increase the CGT liabilities of affected individuals by up to £1,764 and £2,604 in 2023/24 and 2024/25, respectively. This measure is expected to raise £1.6 billon over the next five years. The annual exemption had been frozen at its 2020/21 level for five years under tax-raising measures in Spring Budget 2021. Absent the freeze and today’s cut, the exemption would have been £14,100 in 2023/24. Overall, the exemption is therefore £8,100 lower in 2023/24 than would otherwise have been the case.


Income tax changes: More taxpayers pulled into additional rate tax

“The personal allowance and higher rate threshold will remain frozen at £12,570 and £50,270, respectively, until 2027/28, two years longer than originally planned. A reduction in the additional rate threshold from £150,000 to £125,140 was also announced. This means that income tax liabilities of most taxpayers earning less than £125,140 will typically be the same in 2022/23 and 2023/24 if their income is unchanged. Existing additional rate taxpayers will typically have an income tax increase of £1,243. Those with income between £125,140 and £150,000 will pay an extra 5% income tax on amounts in excess of the new threshold. They will also lose their eligibility for the £500 personal savings allowance, resulting in extra tax on savings income of up to £225. These measures are expected to raise nearly £5 billion over the next five years.

“Although income tax liabilities appear to be flat for those earning less than £125,140, they are paying more tax than would otherwise be the case due to fiscal drag. Assuming the Bank of England meets its inflation target of 2% per annum for the next four years, the personal allowance and higher rate threshold would ordinarily have reached £15,470 and £62,070, respectively, by 2027/28, absent the freezes announced in March 2021 and today. This means that someone earning £25,000 per annum will typically be paying extra income tax of about £580 in 2027/28, while someone earning £65,000 will be paying about £2,940 more. The discrepancy will be greater if inflation is higher.

“The effect of income tax thresholds on taxpayers living in Scotland is different from the rest of the UK, as they are affected by the personal allowance but are only affected by the UK higher rate and additional rate thresholds to the extent that they have savings or dividend income. The tax rates on their other income are set by the Scottish government, which should be confirmed on 15 December 2022.

 

Dividend nil-rate band reduced

“The Chancellor also announced that the current £2,000 nil-rate band for dividend income will be reduced to £1,000 from 6 April 2023, with a further reduction to £500 from 6 April 2024. This will result in additional income tax of up to £88, £338 or £394 for basic, higher and additional rate taxpayers, respectively in 2023/24. These amounts will increase to £131, £506 and £590 in 2024/25. The government expects this to raise over £3 billion over the next five years.”

 

 

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Deloitte spokespeople

Deloitte has a range of spokespeople available to comment on today’s Autumn Statement. They can be reached on 020 7007 3333 or 0207 303 5054 or one of the following numbers:

• Debapratim De - senior economist (07884 765916)

• Amanda Tickel - head of tax policy (07920 270 964)

• Rachel McEleney - personal tax (07826 891 752)

• Alison Lobb - corporate tax (07768 178264)

• James Warwick - employment tax (07855 399368/07436055437)

• Gareth Pritchard - indirect tax (07824895798)

• Gerry Biddle - business rates (07855 399 368)

 

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