Yesterday, the autumn’s third chancellor, proposed the autumn’s second statement. Given the later-than-usual nature of the statement, it was perhaps apt that the headline for the majority of taxpayers was “freezing”.
Income tax and National Insurance thresholds will be frozen at their current rates until April 2028. This does not change the tax rate, however, does fix the threshold which dictates what tax rate applies to a taxpayer.
The only exception to the threshold freezing is the 45% tax band, which has been reduced from those with income above £150,000, to those with income above £125,140. The result being that more taxpayers will move into paying tax at the highest tax bracket.
It should be noted that the above changes apply to non-savings and non-dividend income (e.g employment income, rental income, pension income) for England, Wales and Northern Ireland.
For the moment, these changes will largely not impact Scottish taxpayers. However, as the political divide between Scotland and the rest of the UK appears to continue widening, it will be interesting to see whether the Scottish government follow suit or “stand pat”. I suspect individuals’ opinion on that will be informed by their political persuasion, however we shouldn’t need to wait long for an answer, as the Scottish government is due to deliver its budget statement in December.
There were several further significant announcements in yesterday’s statement, which apply to both Scottish taxpayers, and the rest of the UK:
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- The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023, and to £500 from April 2024
- The Capital Gains Tax Annual Exempt Amount will reduce from £12,300 to £6,000 from April 2023, and to £3,000 from April 2024
- The Inheritance Tax (IHT) nil-rate band will be fixed at the current rates of £325,000 until April 2028
- Minimum wage for people aged over 23 to increase from £9.50 to £10.42 an hour from April 2023
- State pension payments and means-tested and disability benefits to increase by 10.1%, in line with inflation
- The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023, and to £500 from April 2024
Murray Beith Murray, Edinburgh
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