Everyone will pay more tax after the Autumn Statement
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Personal tax receipts hit a record high in the six months to October as inflation pulled more taxpayers into higher tax bands, a trend set to continue as the main tax thresholds remain frozen until 2028. Inheritance tax collected £4.1bn between April and October, according to HM Revenue & Customs data, 14 per cent higher than the same period last year, with annual receipts now double what they were a decade ago. “The Treasury hopes by leaving rates and allowances unchanged, inflation can do the hard work of turning the temperature up on taxpayers without them noticing,” said Alex Davies, founder of broker Wealth Club, adding that it will be the “thousands of hardworking families that will bear the brunt”.
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What else apart from inheritance tax? Income tax, national insurance and capital gains saw a similar trend, with receipts over the past six months also 14 per cent higher year-on-year, despite median pay rising 6.3 per cent, as more taxpayers are forced to pay a higher effective rate of tax. Tax receipts have risen as inflation has picked up and tax thresholds have been frozen. In his Autumn Statement last week, chancellor Jeremy Hunt extended “stealth” freezes on inheritance tax, income tax and national insurance until 2028. He also said he would cut the 45p income tax threshold from £150,000 to £125,140 from April 2023 and halve the tax-free allowances for dividends and capital gains next year, and again in 2024, to help shore up the public finances. How can I keep my tax bill down? While everyone should see their tax bill rise in the years to come, finance experts highlight options to help manage your tax bill — particularly around inheritance tax. Inheritance tax is charged at 40 per cent above a threshold of £325,000 per individual, with an additional £175,000 when a family home is being passed to a direct descendant. Wealth Club’s Davies said the first step you should take is to make sure you have a will. “Without it, your estate will be shared according to a set of pre-determined rules. That means the taxman might end up with more than its fair share.”