FSL CHAIN MAIL (21ST NOVEMBER 2022)

FSL’s Chain Mail is a regular blog containing links to news articles that we think are worth sharing. In this edition, we explore the industry’s views following the 17^th November 2022 Autumn Budget.

Key Points

There were several highlights of Jeremy Hunt’s budget, some of the most prominent being the cuts to dividend tax allowance and capital gains tax exemption. Alongside these, the budget introduced new income tax measures, including a freeze on personal allowance and reducing the threshold for paying the 45% income tax rate.

Additionally, Hunt increased the windfall tax on oil and gas companies to 35%, effective from 2023. While these changes are modest in comparison to the earlier, now mostly-reversed Autumn mini-budget, they are still of great significance to tax advisers, who must understand the implications the changes hold for their clients.

The Impact on Investors

Advisers are not the only ones the budget holds great relevance to, as investors will also be impacted by Hunt’s changes. The first impact is seen in the lowering of the capital gains tax exemption rate, which effectively loses portfolios more money. Commentators also weighed in on the impact increased dividend tax may have on smaller investors who are not as financially flexible as higher earners.

Industry Views

Commentators in the industry appear to be in consensus in regard to the budget, with a majority acknowledging that the tax changes place the onus on corporations, with investors also being one of the hardest hit groups. The markets’ reaction was no more optimistic than that of analysts, with “government bonds and sterling [slipping] further”. The industry, although welcoming of the windfall tax, were quick to note the discrepancies between the rates and allowances faced by electricity generators and oil and gas companies.

While many hoped the budget would bring certainty and some relief in a time of recession, it merely has, in the views of the industry, increased the workload on advisers and managers to protect their clients’ assets. In order to do this, they will need to rethink their strategies and do so with a long-term view.