Your Autumn Statement 2022 update and what it means for you

Managing expectations: a master class?

This was never going to be an easy message for a Chancellor to deliver. The economy is in recession and yet tax rises and tight public spending are now the order of the day.

The Chancellor, in the circumstances, was more upbeat than could have been expected with two key messages:

• Yes, tax rises will be required, with the burden falling on those most able to afford it
• Investment in infrastructure and other capital spending should improve the UK’s long term economic performance.

Whether this will be enough to restore the UK to low inflation sustainable economic growth remains to be seen. As the Chancellor recognised, there remain significant headwinds, at home and abroad.

Stability, growth and public services are the priorities, and we would expect that few would disagree.

What are the key announcements for savers and investors?

• The 45% additional rate income tax threshold is reducing from £150,000 to £125,140 with effect from 6 April 2023 – is it really only a matter of weeks since the previous Chancellor announced the abolition of this rate?
• The dividend tax allowance, currently £2,000, is reducing to £1,000 on 6 April 2023 and to a notional £500 a year later
• The capital gains tax allowance, currently £12,300, is reducing to £6,000 on 6 April 2023 and to £3,000 a year later – as such, the regime becomes much harsher after the current tax year
• The income tax allowance and rates remain frozen, meaning that many more of us will be brought into the higher rate tax brackets – the hidden pain of so called ‘fiscal drag’
• The inheritance tax band and allowances remain frozen, some of which have not changed since this tax was introduced in 1986.

Many more investors can therefore expect to pay capital gains tax, as well as tax on their dividends, with eventually more of their estate potentially lost to inheritance tax.

Making use of available allowances and tax efficient ways to save and invest has never been more important. Depending on your personal circumstances and requirements this could include use of:

• Individual Savings Accounts (ISAs) – the limit is frozen at £20,000 per tax year, an ideal way to avoid the harsher capital gains and dividend tax regimes
• Pension contributions – contrary to some reports the existing generous tax relief regime is maintained; for many of us pension contributions remain a highly tax efficient way to save
• Personal allowances – passing assets between married partners or civil partners remains an effective tax strategy if these would otherwise be wasted.

There has never been a more pressing time to take financial planning advice.

Overall, the Autumn Statement 2022 was not as painful as was being flagged in advance, although still with the prospect of a very tough period ahead as incomes are squeezed by higher taxes and inflation. We see fiscal drag as the hidden tax, promising to take a big bite out of our income and capital over the years ahead. It is the tax that will keep on taking.

The tax treatments set out in this communication are based on our current understanding of UK legislation. It depends on the individual circumstances and may be subject to change in future.

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.