Autumn Statement 2022: Key tax changes
The Chancellor announced threshold freezes to income tax, NIC including employer NIC and inheritance tax (IHT) for an additional two years, until April 2028. Elsewhere, the threshold for the 45p rate of income tax will be reduced in April 2023, from £150,000 to £125,140, bringing more people into the higher rate band of tax.
The dividend allowance will be halved from £2,000 to £1,000 from April 2023 and again to £500 in April 2024. Similarly, the capital gains tax (CGT) annual allowance will reduce to £6,000 in April 2023 and to £3,000 in April 2024.
The freezes will have a gradual effect on the amount of tax that businesses and households will pay over time, bringing more people into higher tax bands, due to changing factors such as average earnings, the Retail Price Index (RPI) and the Consumer Price Index (CPI). The tapering of various thresholds and allowances will also inevitably add complexity to the tax system.
The tax measures announced today will bring more people into higher tax bands and add more complexity to the system for many taxpayers, The most obvious change – the reduction in the threshold for the highest earners – will bring more people into higher rates of income tax over the next five years, but frozen allowances and bands, the reduction in the dividend allowance and capital gains exemptions will also lead to taxation by stealth.
Many taxpayers will find their tax becomes more complex and this will be more difficult for HMRC to administer at a time when its services are under considerable pressure.
The Chancellor also announced that the energy industry will have to pay a higher windfall tax of 35% instead of 25%, and introduced a 45% levy on electricity generators. Electric vehicles will no longer be exempt from vehicle excise duty from April 2025.
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- Legally-enforceable minimum wage for people aged over 23 to increase from £9.50 to £10.42 an hour from next April
- State pension payments and means-tested and disability benefits to increase by 10.1%, in line with inflation
- Apart from in Scotland, top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000
- Income tax personal allowance and higher rate thresholds frozen for further two years, until April 2028
- Main National Insurance and inheritance tax thresholds also frozen for further two years, until April 2028
- Tax-free allowances for dividend and capital gains tax also due to be cut next year and in 2024
- Local councils in England will be able to hike council tax up to 5% a year without a local vote, instead of 3% currently