The delayed Autumn budget, released on 17th November, confirmed speculation that it would focus on raising treasury tax revenues and strive for economic stability while introducing new support packages for those on the lowest incomes.
For taxpayers in the UK and living overseas, there are multiple outcomes, including changes to income tax brackets, dividend allowances on investment income, and further freezes to inheritance tax bands.
As always, the key is to understand how tax reforms affect your finances and ensure your tax planning and wealth management approaches are updated to implement efficiencies wherever possible.
Autumn Fiscal Statement 2022
Chancellor Jeremy Hunt did little to change the tax landscape directly in his first fiscal statement, but managed to change the way tax affects residents and non-residents quite significantly nonetheless.
The headline is that the headline rates of tax will not be changed.
However, the personal allowance and tax rate bands have been frozen from now until 5 April 2028. They had already been frozen until April 2026, but this will bring more people into the tax net, and the higher rate band. The additional rate band threshold has also been reduced to £125,140.
The dividend tax band, which is currently £2,000, will be reduced to £1,000 in April 2023, and £500 in April 2024. Dividend rates of tax have not changed, but when the National Insurance rates were reduced in Autumn 2022, the dividend rates were not returned to the lower rates of 7.5%, 32.5% and 38.1%, so remain at 8.25%, 33.75% and 39.35%.
Capital gains rates of tax were surprisingly not increased in the statement, however, thresholds were significantly reduced from the current £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
Overall, if you have already left the UK, unless you have UK source income, such as rental income or government service pensions, this is unlikely to affect you. If it does, you will be paying more tax in the UK than currently, but in the case of rental income, the tax on this should be offsetable against the tax in your new home country (if any). For government service income, the UK tax will be higher and cannot usually be offset against tax abroad.
The change to dividends is unlikely to affect you unless you have significant other income. This is because of the way the UK taxes such income (or rather doesn’t, if your only other income from the UK is the state pension and bank interest).
Non-residents do not pay capital gains tax on disposals of UK assets except for real estate. Therefore, if you still have UK real estate, these changes may affect the level of tax you pay in the UK. However, if you have held a property for a long time and have moved abroad or are thinking of doing so, you may still be able to dispose of it as tax-efficiently as possible.
If you have not already left the UK, then what are you waiting for? Chase Buchanan can assist you to take advantage of the differing rules and year ends to tax-efficiently rearrange your affairs to minimise your tax and let you start your new life abroad in the knowledge that you have restructured to make your money work harder for you.
These rates will leave UK residents worse off, overall, as they will pay more tax without the rates changing at all. The Nil Rate Band on inheritance tax (the amount you can leave tax-free) has been frozen since 2009, and has now been frozen until April 2028 – so it will not have changed for almost 20 years. In that time, more and more estates have been brought into the inheritance tax net. Whilst the main residence nil rate band has helped to mitigate this, this has also now been frozen until 2028. Catching more people in the tax net by not changing thresholds is called fiscal drag. It can certainly be a drag on your estate.
Whilst there is little you can do if you still have very strong connections to the UK, or assets in the UK, if you have moved permanently, you may want to think about what that means for your estate, and UK inheritance tax. Individuals who have moved to France can use the benefit of a double tax treaty on estate taxes to help them minimise their UK inheritance tax. Can you?
Finally, for those who are living in countries where the UK state pension is uprated every year, the UK state pension will increase by over 10% from April 2023. The standard minimum income guarantee in Pension Credit will also change in line with inflation. That said, the government will also be looking at state pension age and how this is legislated to change in future, so there may be changes ahead for those not yet in receipt of their state pension.