There was much rumour ahead of the Autumn statement about how the hole in the UK finances will be fixed. Overall, there are several changes that will affect the finances of our clients. The government has mostly decided to fix the problem through stealth taxes by freezing most thresholds until 2028. All major changes will apply in the new tax year, from 6th April 2023.
Personal Tax
- The additional rate of tax (45p) will now apply on earnings above £125,140 (down from £150,000) costing high earners around £1,250 pa
- Personal CGT Exemption will be reduced from £12,300 to £6,000 and then £3,000 in 2024/25 tax year with Trust allowances half those.
- Dividend allowance will be reduced from £2,000 to £1,000 then £500 in 2024/25 tax year. Tax rates remain the same at 8.75% for basic rate, 33.75% for higher rate and 39.35% for additional rate
- The changes to Stamp duty announced in September, where the threshold at which homebuyers start paying stamp duty was raised from £125,000 to £250,000 (and from £300,000 to £425,000 for first-time buyers), will be reversed from 2025.
- All other thresholds and allowances remain as they were before the statement including IHT, Lifetime Allowance and Annual Allowances for pensions.
The other measure of note was that the state pension would increase by RPI (10.1%) in April.
The OBR forecasts were particularly gloomy for the UK economy, with high inflation expected and a recession next year. As we manage all client portfolios on a global basis, we are able to select areas where we see value and potential for growth.
Planning
The stealth approach makes it particularly important to use all the allowances while they remain available. With inflation in double figures, the effective tax rises will be painful. For business owners, reviewing how income is drawn from the business, salary or dividends, will be important.
We feel that the number of changes coming up in the new tax year mean that it would be a sensible time to review the structure of existing arrangements for optimal tax efficiency. We would be delighted to help so do please do not hesitate to get in touch.
Please click here to read more
Levels, bases and reliefs from taxation may be subject to change.