Times as they are our Wealth Managers are finding themselves advising more on optimising personal taxation as a hedge against inflation rather than investment advice. Here are the main changes in 2023:
Income tax
The basic rate of income tax will remain at 20%. Other rates will remain the same, though the Autumn Statement announced a number of changes to thresholds. The personal allowance and higher rate threshold are already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. The income tax additional rate threshold will be lowered from £150,000 to £125,140 from 6 April 2023. Can there ever have been quite such a remarkable U turn as abolition to significant increase in less than two months?
The Autumn Statement pledges to “ask everyone to contribute a little, with those on the highest incomes and those making the highest profits paying a larger share” and describes the additional rate tax measure as “steps towards this”, suggesting more in the future?
The government will reduce the dividend allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024. The 1.25% increase in rates of tax on dividends will be maintained so that the ordinary rate will continue to be 8.75%, the upper rate 33.75% and the additional rate 39.35% from April 2023.
Capital Gains Tax
The government will reduce the CGT annual exempt amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. These measures will raise over £1.2bn a year from April 2025.
No changes to the rates of CGT were announced. There were also no announcements concerning the tax treatment of carried interest.
The government will also address capital gains avoidance. In particular, the government will legislate in Spring Finance Bill 2023 so that shares and securities in a non-UK company acquired in exchange for securities in a UK close company will be deemed to be located in the UK. This will have effect where an individual has a material interest in both the UK and the non-UK company and where the share exchange is carried out on or after 17 November 2022.
Inheritance Tax
The inheritance tax nil-rate bands are already set at current levels until April 2026 and the Chancellor has announced that they will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million.
Stamp Duty
The government recently increased the nil-rate threshold of SDLT from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000. The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. The Chancellor has announced that this will now be a temporary SDLT reduction. The SDLT cut will remain in place until 31 March 2025 to support the housing market. The government then intends to repeal these changes.
The annual chargeable amounts for the ATED applicable to enveloped dwellings will be uplifted by the September CPI figure of 10.1% for the 2023-24 ATED charging period.
To ensure you are optimising your personal taxation in 2023, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.