Autumn Statement 2022 – Landlord Reactions

The Chancellor of the Exchequer, Jeremy Hunt, has today announced his Stealthy tax threshold increasing budget in a plan to preserve stability, promote growth and protect public services.

Whilst on the face of it not as severe as many predicted, Hunt took great care not to use the words ‘tax rises’ but everyone will be paying more tax – especially landlords.

He told MPs that the country is in recession and the economy will shrink by 1.4% next year. Government forecasters are effectively predicting a shallow but long recession.

Landlords who are higher-rate taxpayers have been hit with a multiple whammy.

Mr Hunt announced that:

• • The threshold for when the highest earners start paying the top rate of tax at 45p will be lowered from £150,000 to £125,140. Anyone earning £150,000 or more will pay £1,200 more in tax every year.
  • Landlords will be hit when they sell a property because the annual exempt amount for capital gains tax will be reduced from £12,300 to £6,000 in 2023 – then from April 2024 to £3,000.
  • The dividend allowance will be cut from £2,000 to £1,000 in 2023 and then, from April 2024 to £500.
  • Inheritance Tax thresholds will be frozen for the next 2 years – The threshold currently stands at £325,000 with a further residential nil rate band set at £175,000
    

The Stamp Duty cuts announced in September will remain to protect the housing industry, but be time-limited, ending on March 31st 2025

While no rent freeze for the Private Rented Sector has been announced, the Chancellor revealed that social housing rent rises will be capped at 7% to save the average tenant £200 next year.

The Chancellor also revealed that the income tax personal allowance threshold will be frozen until 2028.

He told the Commons: “Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”

That means millions of people will end up paying more in tax because they will earn more – and more people will move into higher tax brackets.

The Government had previously frozen the thresholds until 2026.

Economists say that the freezing of allowances equates to a ‘stealth tax’ because it effectively adds to the headline rate of income tax.

The threshold for Inheritance Tax was previously set by Rishi Sunak when he was Chancellor at £325,000 until April 2026. Now Mr Hunt has extended this until April 2028.

Some tax experts have calculated that workers will now be paying a greater proportion of our wages in tax – and this is at the highest ratio in 70 years.

The Chancellor’s announcement will effectively mean that income tax over the next five years will rise by 1% of GDP

Surprisingly, Universal Credit allowances will increase in line with inflation by 10.1%. However, an additional 600,000 claimants will be actively encouraged back to work or to increase their earnings.

The Pensions Triple Lock has also been protected and pensions will also increase at the same 10.1%

The Autumn Statement highlights:

• More people to pay top rate of income tax: The threshold for when the highest earners start paying the top rate of tax will be lowered from £150,000 to £125,140. Anyone earning £150,000 or more will pay £1,200 more in tax every year
• The dividend allowance will be cut from £2,000 to £1,000 in 2023 and then, from April 2024 to £500
• The annual exempt amount for capital gains tax will be reduced from £12,300 to £6,000 in 2023 – then from April 2024 to £3,000
• The UK is in recession and forecasts are predicting the economy will shrink by 1.4% next year – Hunt says things will get worse before they improve
• Stamp duty cuts will stay in place until March 2025
• While the employers’ national insurance contributions threshold is frozen until April 2028, the employment allowance will be retained at its new, higher level of £5,000 until March 2026
• £280m will be invested to help the Department of Work and Pensions to crack down on benefit fraud and errors in the next two years.
• Energy price cap to be extended 12 months at an average household cost of £3,000
• Social care gets a £2.8bn boost in funds
• The NHS gets an extra £3.3bn
• Education will get £2.3bn more
• The Sizewell C nuclear plant to go ahead
• £6bn provided to help insulate the UK’s homes
• Energy consumption in buildings to be reduced by 15% by 2030

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