If you’ve been struggling to keep up with who is residing in number 10 and 11 Downing Street in recent months, you may be confused by all the tax announcements and subsequent U-turns of 2022.

After April’s budget by then chancellor Rishi Sunak, Kwasi Kwarteng announced a swathe of major tax changes in his September “mini-Budget”. While Mr Kwarteng’s strategy aimed to give Britain’s economy a boost, it resulted in the pound plummeting against the dollar, a fall in the FTSE 100 and a £65 billion rescue plan by the Bank of England to bail out pension funds.

Soon after Mr Kwarteng’s time as chancellor came to an end, and he was replaced by Jeremy Hunt, who revoked most of Mr Kwarteng’s announcements. Furthermore, in November Mr Hunt made his autumn statement as chancellor, which included even more changes. 

If 2022’s succession of tax changes has left you confused, read on to discover how six of the most common taxes have been affected, and what the latest rules are.

Income Tax

In the 2022 Spring Statement, former chancellor and now prime minister Rishi Sunak announced that the basic rate of income tax would be cut from 20% to 19% from 2024. In April 2022, the Personal Allowance – the amount you’re allowed to earn before Income Tax is charged – was frozen at £12,570 until 2026.

Then in September’s mini-Budget, Kwasi Kwarteng said the additional-rate of Income Tax (45%) would be scrapped and the top rate would be 40% from April 2023. He also announced that basic-rate tax would be reduced to 19% from April 2023.

Yet his successor, Jeremy Hunt, then scrapped the reduction to 19% altogether, adding the basic rate of tax would remain at 20% “indefinitely”. Furthermore, he kept the 45% additional tax rate. 

In November’s autumn statement, Mr Hunt went further and slashed the additional-rate threshold from £150,000 to £125,140. This will come into effect in April 2023. The chancellor also extended the Income Tax threshold freeze, meaning it will remain at £12,570 for basic-rate taxpayers and £50,270 for higher-rate taxpayers until 2028.

Dividend Tax

In October 2021, Mr Sunak increased Dividend Tax by 1.25% from April 2022. This means the basic-rate would be 8.75%, the higher-rate is 33.75% and additional-rate is 39.35%.

This was then reversed by Mr Kwarteng who returned Dividend Tax to 7.5%, 32.5% and 38.1% respectively. This drop in the Dividend Tax rate was short lived though, as it was overturned by his successor in October, meaning in the 2022/23 the tax remains at 8.75%, 33.75% and 39.35%.

During his autumn statement in November, Mr Hunt also announced that the Dividend Tax allowance of £2,000 would drop to £1,000 in April 2023. It will then drop to £500 the following year.

Capital Gains Tax

In November’s autumn statement, the chancellor announced that the annual exemption amount for Capital Gains Tax (CGT) will drop from £12,300 to £6,000 from April 2023. It will then drop to £3,000 from April 2024.

Any profits made above these amounts will be charged at between 10-28% depending on the asset sold and your marginal rate of tax.

Inheritance Tax

In November’s autumn statement, Mr Hunt announced the Inheritance Tax (IHT) threshold freeze would be extended until April 2028. This means that you will be able to have £325,000 in your estate before IHT is charged if you’re single, or £650,000 if you are married or in a civil partnership. 

You may also be able to claim residence nil-rate band (RNRB), which, subject to stipulations, could boost these amounts to £500,000 or £1 million respectively. As IHT is typically charged at 40%, speaking to a financial planner to reduce your exposure to the tax could be a shrewd financial strategy. 

National Insurance contributions

During his October 2021 budget, Rishi Sunak confirmed that the government would increase National Insurance contributions (NICs) by 1.25 percentage points. The move was aimed at funding the new health and social care plan.

While the increase came into force on April 2022, Kwasi Kwarteng then overturned it in his mini-Budget. 

This is one of Mr Kwarteng’s announcements that Mr Hunt has not repealed. As such, as from November 2022 NICs stand at 12% and 2% for employees, and 13.8% for employers.

The planned additional 1.25% levy, which was due to come into force in April 2023 has also been scrapped.

Stamp Duty Land Tax

In his mini-Budget, Kwasi Kwarteng announced that Stamp Duty Land Tax (SDLT) would be cut by up to £2,500 from September 2022. The SDLT threshold at which first-time buyers are liable to SDLT was also increased from £300,000 to £425,000, and the maximum value of a property they can claim relief on increased from £500,000 to £625,000.

This remains unchanged by the current chancellor, Jeremy Hunt.

Get in touch 

While we hope this roundup of the main tax changes that could affect you has been useful. Please remember that this is not a complete list, so a financial planner may be able to identify other ways you could reduce your tax liabilities.

If you would like to discuss ways to be more tax-efficient, please contact us on hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high quality service.

Please note

This blog is for general information only and does not constitute advice. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. 

The information is aimed at retail clients only.