The threshold for the additional rate of income tax will be reduced to pull more top earners into the 45p tax bracket
The Autumn Statement reduces the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes from 6 April 2023.
The threshold change will raise £420m in 2023-24, rising to £790m in 2024-25.
Chancellor Jeremy Hunt said: ‘We have tried to be fair by following two broad principles, by asking those with more to pay more. I have not raised headline rates of tax.
‘This means that those earning £150,000 or more will pay just over £1,200 more a year.’
At the same time, the thresholds for base rate and higher rate taxpayers will be frozen until 2028, a further two years added to current plans which will drag more people into higher rates of tax.
Rachel McEleney, associate tax director at Deloitte, said: ‘Those with income between £125,140 and £150,000 will pay an extra 5% income in excess of the new threshold. They will also lose their eligibility for the £500 personal savings allowance, resulting in extra tax on savings income of up to £225. These measures are expected to raise nearly £5bn over the next five years.’
Alex Davies, CEO and founder of Wealth Club said: ‘However necessary, this announcement is brutal for higher earners and investors.
‘Around 250,000 more people will be paying the top rate of tax, many allowances will be frozen until 2028 and the dividend and capital gains tax allowances are being slashed.
‘The good news is there are still plenty of perfectly legitimate ways you can reduce the tax you pay, from investing in pensions and ISAs to crystallising capital gains liabilities now rather than next year.’
Justine Riccomini, head of tax at ICAS said: ‘The Chancellor’s announcement that the 45p additional rate band for income tax will apply at £125,140 from 6 April 2023, instead of the current level of £150,000. This will not apply to Scottish taxpayers in respect of earned income, but will apply to interest income as tax rates are set at a UK wide level.’