There were concerns regarding drastic and immediate tax changes in the Autumn Statement, but this did not occur. For example, the alignment of capital gains tax (CGT) rates with income rate rates which would have increased the top rate of CGT from 28% to 45%.
Although sharp direct tax rises were avoided by Chancellor Jeremy Hunt, the reality is that through altering or freezing thresholds, it will substantially increase HMRC’s tax take over time. The Office for Budget Responsibility confirms that we will see a tax burden at its “highest sustained level since the Second World War”.
There will, of course, be a general election by January 2025 so the position could alter again and certain threshold freezes until 2028 may change.
The key changes announced in the Autumn Statement from a personal tax perspective are:
Personal allowance frozen at £12,570 until 2028 along with National Insurance thresholds frozen. 45% additional rate of income tax will apply on income from £125,140 rather than £150,000 for the 2023/24 tax year onwards. Dividend allowance is being cut from £2,000 to £1,000 in the 2023/24 tax year and then to £500 in 2024/25.
Capital gains tax
The annual allowance is being cut from £12,300 to £6,000 in the 2023/24 tax year and then £3,000 in 2024/25. Trusts will continue to have half the individual allowance.
Inheritance tax (IHT)
The ‘nil rate band’ threshold of £325,000 will remain frozen until 2028.
Stamp duty land tax
Proposals already announced up until 2025 will remain. More in this article.
Vehicle excise duty (VED)
To apply to all electric vehicles (EV) from 2025 (including any electric vehicles registered from April 2017, thereby making it impossible to avoid increased VED by buying an EV pre-2025).
For extra detail on personal tax, please read Alex Wavells Autumn statement 2022 article.
So, are there any planning opportunities?
For most individuals and trustees the tax changes announced will either be unavoidable or not significant enough to warrant a drastic change in their approach.
However, as a well-known supermarket slogan says ‘every little helps’, and there are some points worth considering from a tax planning perspective:
- Individual Savings Accounts (ISA) will become even more valuable for individuals because there is no income tax or CGT on assets within the ISA wrapper. Utilising annual allowances and any transferable allowances on the death of a spouse will continue to be important.
- If gifting for IHT purposes is being considered then looking at doing so now may be attractive, especially if the asset in question is likely to continue to appreciate in value. The freezing of the IHT nil rate band until 2028 means that the threshold will have remained frozen for nearly 20 years by that point, dragging in a huge number of estates into the IHT net without the threshold rising in line with inflation.
- If an asset is being held at a gain then the upcoming changes to CGT are worth considering. Making a decision purely due to this is unlikely to be warranted, but if selling an asset at a gain is already envisaged then accelerating the gift or disposal of it could be helpful. This will be especially so where multiple CGT allowances are available to set against a gain. Take the example of a buy to let property owned equally by two individuals standing at a gain exceeding £24,600. If the buy to let property is sold before 6 April 2023, then no CGT is paid on the first £24,600 saving £6,888 of CGT at the top rate of 28% CGT. If that same asset is sold from 6 April 2024, there will be only £6,000 of CGT allowances available and the additional CGT due would be £5,208 because there is £18,600 less of CGT allowances available between the two owners.
- Investment managers will be mindful of the CGT position within portfolios for individual clients and trustees, and they often seek to utilise annual CGT allowances to help mitigate large gains building up. The ability to do so going forwards is going to much more limited. Ensuring the investment approach is reviewed carefully in light of this will be advisable.
- If there is the possibility to receive income in this tax year which would otherwise be taxed at a higher rate next year then it is worth considering. Certain types of bond also incur an income tax charge when encashed (wholly or partially), and these could also be reviewed. For individuals, if they can afford to do so, they might be able to pay more into a pension or make charitable donations to avoid the increased income tax burden. For anyone already within this income bracket, it is likely to be on their radar because the effective rate of tax is 60% on income between £100,000 and £125,140 due to the loss of the £12,570 allowance by £1 for every £2 the threshold is exceeded.
How can Moore Barlow help?
If you require expert legal and tax advice then please contact the private wealth team and we can also help put you in contact with an appropriate independent financial adviser.