Alison Walker, Partner at Raworths Solicitors, and a STEP-qualified Solicitor and Chartered Tax Advisor, comments on the Autumn Statement 2022 (delivered on 17 November 2022)
Today’s Autumn Statement has been well-trailed and delivered on those promises – income tax threshold freezes at the lower end are a tax rise in real terms with inflation increases meaning more people will be pushed into a higher tax bracket in coming years. Higher earners are more directly affected, with the 45p rate of tax on earnings above £125,140 instead of £150,000 from April 2023. Many people will find themselves paying more tax, not just at the source of their income but also with the reductions in tax-free allowances by April 2024 – with the Capital Gains’ annual exemption being cut from £12,000 to £6,000 to £3,000, and the income tax on dividend income being cut from £2,000 to £1,000 to £500. Keeping the Inheritance Tax nil band rate at the same level until 2028 will impact on the number of families paying inheritance tax at 40% following the death of a loved one, as the value of estates are likely to continue to rise over time.
As always, the devil is in the detail, with further measures to prevent tax avoidance were talked about and a focus of ensuring tax compliance amongst higher earners. The increased relief for business rates would appear to apply only to those in the retail, hospitality and leisure businesses.
Most people with significant investment portfolios are used to weathering economic upturns and downturns in recent years and are likely to stay focussed on their longer-term goals. It is unlikely that they will make snap investment decisions in response to the Statement. There will, however, be relief amongst those with pending sale of properties or shares that the Capital Gains Tax rates were not increased with immediate effect. It will also be interesting to see if this Statement will calm the markets following the impact of the mini-statement, and the wider reaction from the public. A potential change of Government would certainly spur people on to review their tax and succession planning options.