Spring forward to the Budget?
It seems a very long time ago since 2016 when the then Chancellor, Philip Hammond, announced plans to have just one fiscal event a year. The switch from Spring to an Autumn Budget was to allow greater parliamentary scrutiny of the measures ahead of the new tax year.
Fast forward to 2022 and we have had a Spring Statement, a “Growth Plan” (now largely reversed) and an Autumn Statement delivered by the fourth Chancellor of 2022, but no actual Budget. It seems that this is once again reverting to the Spring.
Against that backdrop, Jeremy Hunt’s Autumn Statement sought to bring stability to the markets and aims to balance the UK’s books. He had pre-warned of tax rises, in stark contrast to Kwasi Kwarteng’s radical tax-cutting “mini budget” just eight weeks before. In the event, tax increases largely came from lowering some allowances and freezing others.
On personal tax, the main headline was the lowering of the additional rate income tax threshold from £150,000 to £125,140 (the amount at which individuals cease to qualify for any tax-free personal allowance) from next tax year (2023/24). The higher rate (40%) income tax threshold and the main personal allowance will remain frozen at current rates until the end of tax year 2027/28, as will the current NIC thresholds. The tax-free dividend allowance will decrease from £2,000 to £1,000 in 2023/24, and further to £500 in 2024/25.
On CGT, changes were limited to decreases in the annual exempt amount (AEA) for individuals from£12,300 to £6,000 in 2023/24 and reducing to £3,000 in 2024/25. The CGT proceeds reporting limit, which allows simplified reporting when chargeable gains are within the taxpayer’s AEA, will be set at £50,000. For most trusts, the AEA will drop to £3,000 next year and to £1,500 the year after, which may increase administration costs, particularly for small scale UK trusts.
In the last few years, we have seen recommendations for fairly radical reform of Inheritance Tax but the only relevant announcement was the freezing of the nil rate band (at £325,000) and residence nil rate band (at £175,000) until the end of 2027/28. Reports reveal that the government raised a record £6.1 billion in inheritance tax last year, a rise of 14% on the previous year, and these measures will only serve to help to increase inheritance tax receipts further.
There had been talk prior to the Statement that wholesale reforms to the non-dom regime may be announced but in the event such issues were not mentioned at all, other than a very specific measure. This will effectively deny the remittance basis for distributions and gains on overseas (close) company shares issued in exchange for UK company shares, and has been introduced with immediate effect.
Finally, one of the few survivors of the Growth Plan, the increase in the level at which buyers start to pay SDLT to £250,000 (or £425,000 for first time buyers), has been curtailed by the announcement that these changes will not now be permanent, but will end by 31 March 2025.
There is growing speculation that this may be the calm before the storm and that there are further tax rises and reforms to come. We shall have to wait and see what the Spring Budget brings.