Landlords Bear the Brunt of Tax Changes
Landlords can expect to tighten their belts after the Chancellor unveiled several Autumn Statement 2022 changes likely to see them pay more tax.
Property investors will lose if they run their business individually or through a limited company.
Chancellor Jeremy Hunt has not raised Income tax rates, but the thresholds for the personal allowance or paying at a higher rate is frozen until April 2028.
As wages rise with inflation, more taxpayers will cross from the basic (20 per cent) rate to pay the higher rate (40 per cent) as their income rises across the £50,270 threshold.
High earners will see the threshold for paying additional tax (45 per cent) drop from £150,000 or more to £125,140 from April 6, 2023, adding £1,200 a year to their tax bills.
CGT allowance slashed
The Chancellor also tinkered with capital gains tax.
Again, tax rates remain the same until April 2028, but the yearly personal allowance is reduced - from £12,300 now to £6,000 in April, then to £3,000 in April 2024.
Dominic Agace, CEO of estate agents Winkworth, echoed industry feeling:
“The change to CGT is yet another negative move by successive Chancellors against buy-to-let landlords, many of whom are already leaving the sector due to increased taxation, regulation and rising interest rates.”
The Chancellor also froze the thresholds for national insurance and inheritance tax.
Landlords running property companies can breathe a sigh of relief as the cancellation of the planned corporation tax rise to 25 per cent was confirmed.
Dividend allowance cut
However, shareholders will see their dividend allowance trimmed by April 2024. Investors can earn £2,000 yearly in dividends before paying any income tax, and the threshold falls to £1,000 in April 2023 and £500 the following year.
Dividend tax rates are frozen at 8.75 per cent at the basic rate, 33.75 per cent at the higher rate and 39.35 per cent at the additional rate.
Former Chancellor Kwasi Kwarteng’s stamp duty holiday remains until March 31, 2025.
No duty is paid on homes worth less than £250,000, while first-time buyers win other concessions.
The Chancellor admitted the economy was in a difficult place, mainly due to Russian President Vladimir Putin trying to blackmail Europe by halting oil and gas as part of his war against Ukraine. At that time, the global economy was still recovering from the impact of the COVID pandemic.
Impact of Putin’s War
“Putin’s war in Ukraine has caused wholesale gas and electricity prices to rise to eight times their historic average,” he said.
“Inflation is high here – but higher in Germany, the Netherlands, and Italy.
“Interest rates have risen here – but faster in the US, Canada and New Zealand.
“Growth forecasts have fallen here - but fallen further in Germany.
“The International Monetary Fund expects one-third of the world’s economy will be in recession this year or next.”
In his speech, The Chancellor explained tax rates would not increase but that the levels for paying higher taxes are frozen until April 2028.
“We are taking difficult decisions on tax-free allowances.,” he said.
“I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years.
“Even after that, we will still have the most generous set of tax-free allowances of any G7 country.
“I am also reforming allowances on unearned income.
“The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.
“The Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.”
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