On 17^th November 2022, Jeremy Hunt delivered his first budget as Chancellor, setting out the government priorities of stability, growth and public services.

Having already reversed most of the measures announced by his predecessor’s ‘Mini Budget’ in September, and with the Office of Budge Responsibility (OBR) recently confirming that the UK economy is already in recession, this was not going to be an easy budget.

Many tax allowances had previously been frozen until 2025-26, however, this has now been extended (for some) by a further two years until April 2028. On top of this, the additional rate income tax threshold has been reduced and Capital Gains Tax (CGT) annual exemptions have been cut.

Below is a summary of the key points:

Income tax allowances/thresholds

• The personal allowance will remain frozen at £12,570 until April 2028
• Income tax rates will remain as they are*
• The point at which additional rate tax will become payable will be reduced from £150,000 to £125,140 from 6^th April 2023*

 *(England, NI & Wales – the Scottish Budget does not take place until 15^th December)

Dividends

• The dividend allowance is to be halved from £2,000 to £1,000 from 6^th April 2023
• It will be halved again to £500 from 6^th April 2024
• The dividend tax rates will remain at 8.75%, 33.75% and 39.35%

Pensions

• No changes have been announced to pension tax relief
• However, with the reduction in the additional rate tax band to £125,140, more higher earners will be able to claim pension tax relief at 45%
• The State Pension will increase by 10.1% from April 2023
• For the moment, the pension Lifetime Allowance (LTA) is expected to remain fixed at £1,073,100 until 2025-26

ISA Allowances

• Will remain fixed at the current levels – £20,000 (ISA) and £9,000 (JISA)

Capital Gains Tax (CGT)

• The annual exemption for CGT will be cut from £12,300 to £6,000 from 6^th April 2023
• It will be cut again to £3,000 from 6^th April 2024

Inheritance Tax (IHT)

• The freeze on both the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) has been extended to April 2028
• The NRB will remain at £325,000 and the RNRB at £175,000

Corporation Tax

• Set to rise to 25% from April 2023, as originally planned
• Small companies with profits below £50,000 will continue to pay at the current rate of 19%
• Tapering relief for businesses with profits between £50,000 and £250,000 will be reintroduced

National Insurance

• The additional 1.25% that was added to the rates for NI for 2022/23 was removed from November 2022
• The NI thresholds will be fixed at the 2022/23 levels

With inflation expected to remain high and the reduction in some of the allowances noted above, it is more important than ever to efficiently utilise your available allowances.

Should you wish to discuss any of these changes, please contact Val or Claire, to discuss further.