During his first Autumn Statement to Parliament, Jeremy Hunt announced measures to put the country on a “path to stability”, but Thorne Widgery says the decision to freeze and reduce personal tax reliefs, thresholds and allowances could hit the pockets of many taxpayers.
The Chancellor had a tough challenge ahead of him as he tried to balance the books and deal with rising inflation, interest rates and a cost-of-living crisis.
While he avoided calling many of his measures a tax rise and pointed out that rates weren’t increasing, the reality of his changes means that business owners and workers will see the amount of tax they pay rise in years to come.
“Jeremy Hunt seems to have taken a very measured approach in putting together his Autumn Statement,” said Daniel Crowther, CEO at Thorne Widgery. “His policies aren’t an obvious attempt to push up taxes, but people will pay more as their wages rise due to inflation and they find themselves exceeding their current allowances and move into new tax bands following the extension of the personal tax freeze until 2028.”
During his speech, the Chancellor also announced a reduction to the Additional Rate Income Tax threshold from £150,000 to £125,140 in April 2023, while the annual Dividend Tax Allowance and Capital Gains Tax exemption will also fall twice in the next two tax years.
“These changes on their own might not seem that significant but combined as a whole they will mean that many of us pay more tax through our earnings or when we make a gain from the assets we sell,” added Daniel.
Thorne Widgery said that when it came to the finances of businesses the £13.6 billion of support to help with the transition to a new business rates system was helpful, especially for hard-hit such as bars, restaurants and retailers.
However, further changes to the SME R&D tax system would be less welcome, especially the reduction to the SME scheme additional tax deduction, which will fall from 130% to 86% for expenditure on or after 1 April 2023.
Daniel said: “The real impact of this change may not be as great as feared due to the rise in Corporation Tax from April, which may mean that the amount of relief businesses receive won’t change significantly – especially for those paying the top 25 per cent rate of tax.”
With many small changes to existing tax legislation coming up, Thorne Widgery said it was important for businesses and individuals to seek advice.
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