Autumn Statement 2022 — Weightmans experts outline key proposals
Today, Thursday 17 November 2022, Chancellor Jeremy Hunt delivered the Government's Autumn Statement, outlining proposed tax rises and spending cuts.
Weightmans' legal experts assess the Statement's contents, including cuts to tax free dividend allowance, changes to the top rate of income tax and the freeze on inheritance tax allowance:
Commenting on the cut in tax free dividend allowance, Hadyn Rogan, Partner and tax law specialist at Weightmans LLP, said:
“Following the September ‘mini budget’ it came as no surprise that the Chancellor would need to look to increasing taxes and trimming allowances wherever possible to help provide some stability.
“The cut in tax free dividend allowance from £2,000 to £1,000 was one such example of this. However, this will likely disproportionately impact small businesses and could have a potentially harmful impact on the economy, as the cut in the allowance combined with the earlier corporation tax increase will significantly increase the tax burden on many businesses.
“Although money needs to be recouped, these changes could potentially see longer-term damage with many small businesses unlikely to be able to absorb these additional costs together with rising energy costs through the winter and it is to be hoped that other support – in the form of grants for example - will be provided instead.”
Commenting on the changes to the top rate of income tax, Jon Shankland, Partner and estate planning specialist at Weightmans LLP, said:
“Lowering the 45% income tax threshold from £150,000 to £125,000 may be politically expedient as a means of bringing extra income to the exchequer without impacting lower earners, something that may prove to be a vote winner in the current environment.
“However, this will likely prove unpopular with many of the medium level high earners, many of whom have specialist skills in sort after growth areas of the economy required to help the country climb out of recession. The hit to this middle band, many in the service industries, may prove a disincentive for individual investment and could drive a talent pool away from the UK in what are some competitive growth industries.”
Commenting on the freeze to inheritance tax allowance, Richard Bate, Partner and wills, trusts and estates specialist at Weightmans LLP, said:
“The nil rate band inheritance tax allowance has not increased since 2009, and now following today’s Budget is going to remain at the same level for another two years. The idea of it increasing annually is becoming a distant memory and is bringing more and more estates within the IHT net as average house prices increase.
“At the same time, the complicated residential nil rate band allowance of up to £175,000, for certain individuals with children and owning a house of an appropriate value, remains. By retaining this allowance and not modestly increasing the general nil rate band allowance for all instead seems like a missed opportunity.”
To find out more about the key announcements, download our summary of the Autumn Statement, with comments from our legal experts.
- Tax free dividend allowance to be halved
- 45% tax free income tax threshold to be lowered from £150,000 to £125,000
- Nil rate band inheritance tax allowance to stay the same level for another two years