Autumn Statement - Barret Kupelian's reaction transcript

Transcript

We knew that there would be pain ahead.

HMRC is expecting to collect an additional thirteen billion pounds by twenty-twenty-eight as a result of the personal tax measures announced in the autumn statement.

That is a huge take, at a time when people are feeling the effects of rises in the cost of living, and below inflation pay increases.

Looking at the detail, most of the measures were well trailed in advance, and surprises were few.

Whilst there had been some speculation that rates may rise, there are no rises in headline rates. Rather, we’re seeing a drop in the threshold for top rate tax, a big freeze for other personal tax thresholds and cuts in certain allowances including the Dividend allowance and Capital gains tax annual exemption. A cut in allowances and thresholds is unprecedented and so taxpayers may wonder what could happen in the future.

Nearly thirty-percent of the extra thirteen billion pounds in personal tax take will come from the reduction in the forty-five-percent tax threshold, to one-hundred-and-twenty-five-thousand one-hundred-and-forty-pounds.

This brings the top-rate band into line with the point at which people also lose their personal allowance.

This means that these individuals will pay an effective tax rate of sixty percent on income between one-hundred-thousand-pounds and one-hundred-and-twenty-five-thousand one-hundred-and-forty-pounds, and forty-five percent on income above this.

A further twenty-three-percent each is coming from the reduction in the dividend allowance and vehicle excise duty exemptions for electric vehicles.

Threshold freezes create ‘fiscal drag’ whereby tax receipts rise, because tax bands aren’t increasing in line with income and wage rises. For the maximum impact to be felt, in terms of increased tax revenue, employment needs to hold up and wages continue to rise.

The reductions in annual exemptions for Capital Gains, and Dividend Tax will bring more people within the scope of these taxes. The result will be an increased tax-return compliance burden for both individuals, and potentially HMRC - the historic reason for these annual exemptions was largely to avoid this burden.

The Chancellor talked about the strongest in society shouldering the burden. In terms of personal tax, this includes savers and people who ‘have more’.

But everyone is going to feel poorer as a result of recession, inflation and tax changes.

The OBR anticipates a cumulative six-and-a-half-percent cut in real household disposable incomes relative to twenty-twenty-one levels. This type of contraction has never been recorded in Britain’s post war history.