Autumn 2022 budget statement – how to manage your tax liability

James Turner, Director at Turner Little, explores what the Autumn budget statement means for individuals when it comes to personal taxation.

For many individuals, the Autumn budget Statement of 2022 delivered a blow to finances through various forms of taxation. While these will be implemented on a sliding scale up until 2024, this provides time to review how assets are held in order to try and manage how and how much tax is paid.

As well as assets held, there is scope to explore where an individual should have their main residence, as unlike the UK, there are several countries that are offering tax breaks in relation to personal taxation.

If we look at the various announcements in the Autumn statement, there are several options open to individuals to explore.

 

 Tax threshold freezes

The big one here is a freeze on the threshold for inheritance tax till at least 2028. Currently standing at £325,000 or £500,000 if you leave your assets to your children or grandchildren, anything above this is liable for 40% tax.

Those thresholds, when you consider how much property has gone up by in the last two years alone, means many more people will have to start paying it. There was a jump of 14% in tax revenue last year alone.

However, there are several ways in which inheritance tax can be legally reduced or accounted for. While everyone’s circumstances are unique and will require a tailored solution with the help of experts, the use of limited companies, Trusts and Foundations can help reduce the amount of tax due.

An example would be if an individual owned several properties and wished to leave them to his children should he die. Owning the properties through a limited company that is controlled by a Trust can mean there would be no inheritance tax to pay. There are several other benefits from owning property in this way including tax relief on mortgage interest payments and what tax you pay on the profits.

 

Dividend allowances and additional rate of tax

By 2024 the dividend allowance will be just £500, while the threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140. While there is little to be done if the UK remains your main country of residence, there are other options.

While there are several countries world-side that offer substantial tax relief for expats, within Europe, countries such as France, Spain, Ireland, Germany, Portugal and the Netherlands. The savings are not small, either. In Spain alone, someone on an income of 250,000 EUR could be up to 40,000+ EUR better off than if they lived in the UK.

However, there are rules and regulations that need to be considered to which country is best for you. As always, hiring the right expert to assist you in reviewing your current situation and developing a tailored solution means everything is taken care of and there won’t be any stumbling blocks later that have the potential to ‘catch you out.’

 

Capital gains tax

Just like the dividend tax, the capital tax gains allowance is being reduced from £12,300 to £3000.

While assets that are held in limited companies sold are except from capital gains, the profit from the sale does count towards corporation tax, which is rising to 25% of profits over £50,000.

While there is not much you can do it you are a UK resident, there are options if you reside in other countries. Capital gains is only payable when you are a UK resident, even if you are selling assets based in the UK e.g. property. If you were to become a ‘non-habitual residents’ (NHR) in Portugal, you are exempt from capital gains taxes for the first 10 years. Making it a cost-effective way to sell assets in the UK during this time.

Tax and taxation rules are complicated which is why we always recommend seeking out experts whose job is to understand this for you. Experts who operate globally are best placed as they are able to understand the rules and laws that could have an implication on your own personal wealth.  Speak to a member of our trusted team today