‘Enormous’ numbers of people will pay more tax in 2023 with threshold freezes | Personal Finance | Finance
Research from AJ Bell found workers’ tax bills will increase by 3.5 percent because of the freeze. The allowance freeze is the equivalent to an extra two percent on the basic rate for someone earning the average UK salary of £33,000.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, warned many people will see their tax bills go up in 2023.
She said: “The round of tax hikes in the Autumn Statement made for miserable reading, but even before that we were on for higher tax bills, because the freezing of the income tax thresholds means that wage rises will push more people into paying more tax – and push enormous numbers of people into higher tax bands.
“These kinds of stealth taxes tend to slip under the radar but can have a much bigger impact than a tax hike.
“The Institute of Fiscal Studies estimates that freezes to personal tax thresholds will cut household income by an average of £1,250 by 2025/26.”
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Other changes announced in the Budget include the additional rate threshold for income tax being lowered from £150,000 to £125,140, meaning more people will be hit by the 45 percent additional rate.
Ms Coles spoke about other tax hikes that will hit Britons in 2023. She said: “For those who run their own business and pay themselves in dividends, and for investors with large portfolios outside an ISA or pension, there’s also the threat of more dividend tax as the allowance halves in April.
“For those investors there’s also the risk of capital gains tax after the allowance for this is halved in April too.
“When you add in higher council tax and the frozen inheritance tax bands, we’re being stung for more tax on all sides.”
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“Our research shows that over a fifth of Brits feel that tax is their biggest financial burden which they are least prepared for.
“With the cost-of-living crisis, and now a string of tax changes, the number of taxpayers unable to pay their bill is only set to continue rising without adequate information and education round the topic.”
Jamie Morrison, head of tax at accountancy firm HW Fisher, warned ahead of Autumn Statement announcement that slashing the capital gains allowance would mean tens of thousands of Britons being hit by the tax.
He said: “The OBR estimates that for the current tax year, capital gains tax accounts for £15billion of overall tax receipts – but this only represents 1.5 percent of all UK tax receipts.
“This explains why the Government would have to make a significant change to capital gains tax for it to result in a substantial and meaningful contribution to the Treasury.
“If the new Chancellor decides to halve the £12,300 tax-free allowance for capital gains to £6,150, tens of thousands will find themselves paying the tax for the first time.”
