To quote Jean-Baptiste Colbert: “The art of taxation consists in so plucking the goose to obtain the largest possible amount of feathers with the smallest possible amount of hissing”.
Such is the case with the government freezing the tax thresholds. According to the Resolution Foundation, the upshot of the freeze between the years 20/21 to 27/28 will amount to £25bn – this is compared to the £9bn forecast when it was announced in March 2021.
The biggest change is no change at all! The income tax threshold is being frozen at £12,570, with the higher rate income threshold pegged at £50,270 for taxpayers in England, Wales and N Ireland (assuming that the personal allowance is available in full). This is against the backdrop of increasing inflation.
The implication of the foregoing is that more taxpayers than ever are being dragged, unwittingly, into the higher rate tax bracket. This, with the cut in dividend allowance and capital gains exemption, does make for challenging tax times ahead. This is even more so for higher earners where the threshold for the top rate of income tax is falling from £150,000 to just over £125k.
More than ever, it is imperative that quality tax advice is sought to ameliorate the effect of the foregoing.
If you have any queries regarding your tax liability and planning opportunities and would like assistance please contact Stephen Williams on 01633 653147 or Stephen.Williams@kilsbywilliams.com. Alternatively, please contact your usual advisor on 01633 810081 or email firstname.lastname@example.org