Chancellor Jeremy Hunt has outlined a sweeping package of tax rises and spending cuts in his Autumn Statement. These measures are designed to help balance the government’s books, tackle the cost-of-living crisis and rebuild the UK economy following a period of unprecedented turbulence, and given that the UK is currently in a recession. In addition, some measures represent a dramatic reversal of former Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng’s tax cuts previously announced at the mini budget in September 2022.
Given the political climate and with millions of households struggling with energy bills, one of the main headlines is an increased windfall tax on energy companies which is estimated to raise around £50bn by March 2028. Also provided for is an effective widening of the scope of income tax over the next few years, with Mr Hunt previously saying that everyone would pay more tax as part of the UK’s recovery plan.
A selection of key tax points from the Autumn Statement are summarised below:
Income Tax and National Insurance:
- From April 2023 the rate at which people pay the additional rate of income tax, charged at 45%, will drop from £150k down to £125,140 (the figure at which no personal allowance is available)
- Personal tax thresholds and rates (20%, 40% and 45%) will be maintained at current levels until April 2028 (an additional two years). The effect of these measures will be to raise more money since more people will fall into the higher rate categories as average wages rise
- The National Insurance threshold for employees (£12,570) will be frozen until April 2028
- Also on National Insurance, the Employment Allowance of £5,000 for employers will be retained
Capital gains and dividends:
- The tax-free allowance for capital gains will be reduced in two stages: for tax year 2023/24 it will be reduced from £12,300 to £6,000, and for tax year 2024/25 it will be reduced further to £3,000
- New capital gains tax avoidance provisions: where an individual holds at least 5% of the shares in a UK close company and exchanges these for shares in a non-UK ‘close’ company in which they also hold at least 5% of the shares, the replacement shares will be deemed to be located in the UK. The effect will be to disallow non-residents from claiming the remittance basis on such a gain
- Following the 1.25% increase in dividend rates which came into effect in April 2022, the tax-free dividend allowance will be reduced to £1,000 in 2023-24 (currently £2,000), and then to £500 in 2024-25 (this is as part of the emphasis on taxing ‘unearned’ income)
Stamp duty:
- Stamp duty on residential property: the cuts announced in September 2022 will now be ending on 31 March 2025, as opposed to being permanent. Thus, the nil rate band will at that point revert from £250,000 to £125,000 (for first time buyers, this will change from £425,000 to £300,000)
- First time buyer relief will after this date also be reduced from £625,000 to £500,000
Energy tax matters and Miscellaneous:
- The previously announced Energy Profits Levy (a windfall tax imposed on UK oil and gas extractors) is being increased from 25% to 35% and will be extended from December 2025 until March 2028
- There will also be a temporary levy on proceeds from electricity generators of 45%, running from January 2023 to March 2028, in conjunction with the existing tax provisions on generators of electricity
- There will not be introduced an online sales tax (given concerns had been raised about possible unfair outcomes between different business models and the complexity of introducing such a tax)
