On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of rising inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.
Income tax rates
The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely. At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan. From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140. The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
Income tax allowances
The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively. The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24. Dividends The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows: • the dividend ordinary rate – 8.75% • the dividend upper rate – 33.75% • the dividend additional rate – 39.35%. As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%. In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £A500 from April 2024. These changes will apply to the whole of the UK.
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