PRESS RELEASE : Autumn Statement – PwC comments on personal and capital tax measures [November 2022]

The press release issued by 17 November 2022.

Commenting on the personal tax measures announced at today’s Autumn Statement, Laura Morris, tax partner at PwC, says:

“HMRC is expecting to collect additional revenues of 13bn by 2028 as a result of the personal tax measures announced today. Nearly 30% of this will come from the reduction in the 45% tax threshold with approximately 23% each coming from the reduction in the dividend allowance and vehicle excise duty for electric vehicles.

“While the freezing of thresholds brings more people into higher tax brackets as wages and incomes increase, it’s clear that savers and people who ‘have more’ were the biggest focus of the personal tax changes announced today.

“The reduction in the threshold for the 45% tax rate to £125,140, brings it in line with the point at which individuals also lose their personal allowance. This means people will pay an effective tax rate of 60% on income between £100,000 and £125,140, and 45% on income above this.

“Threshold freezes create ‘fiscal drag’ whereby tax receipts rise because tax bands are not increasing in line with income and wage increases. For the maximum impact to be felt in terms of increased tax revenue, employment needs to hold up and wages need to continue to rise.

“The reductions in annual exemptions for Capital Gains and Dividend Tax will bring more people within the scope of these taxes and increase the tax return compliance burden for both individuals and potentially HMRC.”

Commenting on capital taxes, Alex Henderson, tax partner at PwC, adds:

“The Chancellor has announced a wide range of seemingly technical and limited changes to the tax system to raise taxes but they will have significant practical consequences. Many more people will now find themselves caught by the new lower thresholds which could mean we see behavioural changes. If you put yourself in the shoes of someone considering selling or investing in an asset, you may well delay your decision due to the threshold changes, but also due to the Chancellor’s signalling of a future direction of travel aimed at taxing capital gains more heavily.

“There will be a knock-on impact on the complexity of the tax system. The capital gains relief is only available to the most wealthy, but it does mean more smaller gains will now enter the tax system, adding to complexity for taxpayers and HMRC alike. The question is whether there will be any significant uptick in tax receipts resulting from these changes after the costs and behavioural changes are factored in.

“Ultimately all taxpayers value clarity and stability when it comes to taking a longer term view and unfortunately even relatively technical changes when they come seemingly every year undermine confidence.”