Tax Increases as No Magic Lamp Budget 22
Published / Last Updated on 18/11/2022
The Autumn Statement has grabbed all the headlines with “robbing the strivers”, “robbing taxpayers” and “biggest standard of living fall since 50s” and with not much praise for the inflation 10.1% increases to state pensions and benefits. ‘Wake up and smell the coffee’ you headline greedy journalists and narcissistic politicians. The reality is we have over £500bn of covid-19 debt, furlough pay, grants, self employed support schemes, vaccination programmes, the 2nd biggest military support in the world for Ukraine plus another £60-70bn of support for energy grants, low-income household additional support, more NHS, social care, and education funding.
As we said earlier in the Benefits Video for Autumn Statement 2022, there is no magic lamp to rub and churn out money. Whether your politics are blue, red, yellow, purple, or green, if you borrow money it has to be paid back. Granted, some of the debt will be devalued by inflation over the years but we need to pay more tax to repay our debts and need to be able to demonstrate that we are taxing people accordingly to give confidence that the UK ca pay its debts. We will need to borrow more over the years.
All Allowances Frozen (and extended to 2028) or Reduced
Personal Tax Allowance at £12,570 was frozen until 2026, this has now been extended to April 2028 meaning all taxpayers with gradually pay ever more income tax over the next 5 years.
The impact of a frozen personal allowance will mean many higher earning taxpayers will pat an additional £1,243 pa income tax. For a worker earning £30,000 pa, with pay rises at 5% pa, this will mean an additional £695 tax by 2028. For those earning £50,000 with 5% pa pay rises, this will mean £3,403 more tax by 2027-28. It’s even worse at the ‘top end/ if you earn over £125,014 pa.
45% Tax Threshold Reduction: the starting point for additional rate tax 45% is £150,000 this reduces to £125,140. This may mean cumulatively £9,765 in more taxes by 2028.
Don’t forget all these taxes are per person and with nearly 30 million workers, this is a lot more tax that we will be paying but nowhere near what some EU nations pay today.
Inheritance Tax Allowances were frozen until 2026, this has now been extended to April 2028 meaning estates will pay more inheritance tax. The Inheritance tax nil rate band of £325,000 was set in 2008-09 and will remain until April 2028, that’s a massive 19 years of frozen allowance.
Electric Vehicles Road Tax
This is a new tax that will apply from April 2023. This will affect those that can afford to buy an EV, not necessarily low-income families. It was inevitable that with the switch over to EVs from combustion engines, EVs would eventually pay road tax. EVs still use the roads, street lighting, cause road repairs, traffic lights, motorways etc as well as wanting charging points on streets so they should pay.
Capital Gains Tax
The capital gains tax free annual allowance is currently £12,300 pa. This is being reduced to £6,000 in April 2023 and £3,000 in 2024. This is going to hurt the ‘strivers’, wealth builders and accumulators. If you own investment property, shares, artworks, bullion or even cryptocurrency, you gains will be liable even more taxes over the years. Use your CGT allowance before it reduces. Use it or lose it. This may force property investors to dump properties given the burden already of fire safety improvements, energy efficiency improvements and higher stamp duty etc. Property prices may fall and tenants may need to move on if the landlord sells.
Dividends
We already know that dividend income from shares was increased by 1.25% for a NHS and Social Care levy and this has remained rather than being withdrawn as it has been for national insurance. In addition, the tax-free dividend income allowance of £2,000 pa is being to £1,000 pa in April 2023 and just £500 pa in 2024. This will hurt all shar owners but mainly small, limited company business owners with more income taxes and now more dividend taxes on top of already confirmed higher corporation taxes.
