The chancellor announced tax rises calculated to be around £24bn in the third financial announcement in as many months. Completing a huge U-turn in government tax policy.
Tax rises by stealth
The amount at which tax is paid has been frozen for over 5 years. The current £12,570 threshold for income tax and employee’s national insurance will not move until at least 6th April 2028, with inflation running at over 10% as wages rise this move increase taxes for everyone in the UK.
The Employers national insurance threshold has been frozen at £9,100 until April 2028, but the tax free amount given to employers will be retained at the higher level of £5,000.
The top rate of income tax will be payable on income over £125,140, reduced from the previous rate of £150,000.
Minimum wages rises
From April 2023 this has increased to £10.42 for adults 23 and over, £10.18 for adults 21 to 22 and £7.49 for 18- to 20 year olds. Apprentice rates increased to £5.28. This is a 10% pay rise across the board for anyone on minimum wage.
Capital Gains and Inheritance tax
The Capital Gains annual exemption (tax free amount available) is to be cut from £12,300 to £6,000 with effect from 6th April 2023 and halved again to £3,000 in April 2024.
The threshold at which Inheritance tax becomes payable, is to remain at £325,000 per person until April 2028. This rate was originally introduced in April 2009. Inheritance tax is payable at a rate of 40% when charged.
Benefit in kind rates on electric company cars have been set until 2028. They will go up 1% a year from 2025/26 to a maximum of 5%. Ensuring low tax rates for electric vehicles for the foreseeable future.
The advisory fuel rate for electric cars will increase from 5p per mile to 8p per mile from 1st December 2022.
Fuel excise duty (car tax) will become payable on electric vehicles from 2025.
Dividend allowance is cut from £2,000 to £1,000 from April 2023 and reduced further to £500 from April 2024.
The increase in dividend tax rates of 1.25% across all tax bandings has been maintained from April 2023.
R&D relief for SME’s will reduce from 130% to 86% and the repayable credit from14% to 10%.
According to the office for budget responsibility a recession started during the last quarter for 2022 and will last just over a year so a tough 2023 awaits business and individuals alike it is fair to assume at this point.