Tax - Autumn Statement 2022

Impact on Individuals

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Millions more people will pay tax due to fiscal drag caused by freezing tax thresholds and allowances
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Income Tax

From April 2023 the threshold at which individuals will pay additional 45% rate of tax reduced from £150,000 to £125,140. Although not a new announcement in the Statement, it is worth noting that the impact of the phased reduction of the personal allowance when income reaches £100,000 means that those earning between £100,001 and £125,139 will pay an effective rate of tax of 60% on that slice of income.

Income Tax Personal allowance frozen at £12,570 for a further 2 years to April 2028

Dividend allowance reduced from current £2,000 to £1,000 from April 2023 and £500 from April 2024

Capital Gains Tax

Capital Gains tax annual exemption reduced from £12,300 to £6,000 from April 2023 and £3,000 from April 2024. The Office of Tax Simplification’s CGT report issued November 2020 estimated that a reduction of the annual exemption to £6,000 would result in an extra 235,000 individuals having to report a capital gain, and a reduction to £2,500 would result in an extra 360,000 individuals having to report.

Inheritance Tax

Thresholds frozen for a further 2 years to April 2028. The threshold has been frozen at £325,000 since 2009. Freezing the threshold will mean many more Estates having to pay inheritance tax if asset values rise.

Pension Investments

Despite promises by Jeremy Hunt there was no reference to addressing the problems of Pension Annual Allowance and Lifetime Allowance and the adverse effect on retaining doctors in the NHS

Measures impacting non-domiciled taxpayers

The Chancellor introduced measures that may impact certain UK taxpayers who are non-domiciled. 

Non-domiciled taxpayers in the UK have historically been able to claim the remittance basis meaning they pay tax on UK source income and gains as normal but only pay tax on non-UK source income and gains to the extent that they bring these into the UK.

The regime was tweaked slightly today and could have an impact on non-domiciled shareholders considering restructuring their business interests.  It was previously possible for a non-domiciled individual to restructure their shareholding in a UK company by exchanging their shares for shares in a non-UK company with the result that income and gains arising in respect of shares in the non-UK entity could fall outside of the UK tax net. From today, where such a share exchange takes place and the individual holds more than 5% of the shares in the UK company (and the company is ‘close’), the new shares held in the non-UK company will be treated as if they are UK-situs shares. Where a shareholder is impacted by these rules, dividend income received from the non-UK company and gains on disposals of those shares will be subject to UK tax regardless of whether the income or gains are brought into the UK.

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