Autumn Statement 2022: Our Tax team reacts
Following today’s Autumn statement and the Chancellor Jeremy Hunt delivering a plan to tackle the cost of living crisis and rebuild our economy, here’s how some of our tax partners reacted.
The Autumn Statement presents a hard hit for earners and families, with tens of billions of tax rises announced today, giving the highest tax burden for the last 70 years.
Rather than increasing the tax rates, today’s announcement largely raise tax by freezing the rates for the main personal taxes – Income Tax, Capital Gains Tax, Inheritance Tax but either freezing or reducing the tax-free allowances.
As a result, a large number of taxpayers will be dragged into the higher rate bands. The freeze in rates will hit the middle hardest, rather than taxing those most able to shoulder the burden.
Due to the quirks of the tax system people earning up to £125k already suffer tax at marginal rates of up to 60% (on the abatement of the personal allowance and withdrawal of child benefit). This Autumn Statement now ensures that as inflation hits more of their earnings will be taxed at the highest rates.
The Chancellor has also filled the gap by lowering the tax-free exemptions for Capital Gains Tax and dividends. These exemptions have been useful in not only saving people tax but avoiding people with low levels of dividends/gains from having to complete tax returns and simplifying the tax system for the vast majority of taxpayers. With the dramatically lower allowances, this will potentially push a lot more taxpayers into completing tax returns. As HMRC is already under a huge amount of pressure and under resourced, if there is an increase in the number of people completing tax returns, will HMRC be able to cope? The increased level of resource for HMRC appears modest in the context of these changes.