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The hidden tax rise.

Tax
Chan­cel­lor Jeremy Hunt announced a range of Budget reforms to bene­fit higher-earn­ing pen­sion savers but left untouched tax increases that will affect mil­lions of work­ers as price rises per­sist.

In changes announced in Novem­ber, thresholds and allow­ances on income tax, national insur­ance and inher­it­ance tax have been frozen until 2028, and the tax-free allow­ances on cap­ital gains and dividends will be halved next month, and again the fol­low­ing year.

Gov­ern­ment doc­u­ments showed these decisions would raise even more than estim­ated in Novem­ber, the con­sequence of «fiscal drag» pulling more earners into higher tax brack­ets.

The thresholds for income tax have been frozen since 2021 and will remain so des­pite self-assessed income tax receipts jump­ing by a third year-on-year in Janu­ary to £21.9bn.

Those earn­ing between £100,000 and £125,140 will con­tinue to pay a mar­ginal tax rate of 60 per cent because the per­sonal allow­ance tapers down.

Investors are also bra­cing for the £12,570 cap­ital gains tax-free allow­ance to fall to £6,000 next month, a move that will draw an extra 250,000 tax­pay­ers into the CGT net, accord­ing to the Chartered Insti­tute of Tax­a­tion. The allow­ance will then be cut again next year to £3,000.

The exemp­tion reduc­tion means that from April 2024, those liable for CGT will pay up to £2,604 more, accord­ing to Nimesh Shah, chief exec­ut­ive at tax adviser Blick Rothen­berg.

Cut­ting the dividend tax allow­ance to £1,000 will cost a basic rate tax­payer £87.50, a higher rate tax­payer £337.50, and an addi­tional rate tax­payer £393.50 next year. Halv­ing it again from April 2024 means it will fall to one-tenth of the £5,000 allow­ance when it was intro­duced in 2016.

The slash­ing of the dividend tax allow­ance is fore­cast to raise £3.08bn in the five years to 2027-28.

The inher­it­ance tax threshold, which has been at £325,000 since 2009, will also be held at this level until 2028. Tax receipts from inher­it­ance tax rose from £2.3bn in 2009 to £6bn in 2021. 

www.sba.tax

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Comments

  1. Sam16 March 2023 at 11:00

    Those hidden tax rises should have been discussed with regular people and they shouldn't just do what they want or think is best. They need to consult people or risk angering them beyond measure. This is one of the big blunders of Hunt.

    ReplyDelete
  2. Liam16 March 2023 at 13:32

    A few of these taxes will be held for a few more years which is a good way to announce they will go up. But there are still measures that will affect way too many people and that's not good.

    ReplyDelete

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