Now that 2023 is well underway, it’s important to look forward to what you might be able to expect for your wealth in the new year.

So, discover four important financial facts that could affect your money in 2023.

1. Changes to tax rules could mean you’ll pay more tax

As a result of changes made in chancellor Jeremy Hunt’s autumn statement in November 2022, you may find yourself paying more tax when the new tax year begins on 6 April.

Firstly, the level at which the additional-rate Income Tax band comes into effect has been lowered, falling from £150,000 in 2022/23 to £125,140 in 2023/24. That means any income over £125,140 could be subject to the 45% top rate of tax, rather than the 40% higher rate.

According to Politics Home, around 250,000 people currently earning between £125,140 and £150,000 will be pulled into the top tax band as a result of this change.

Meanwhile, as stated in the transcript of Mr Hunt’s speech on the government website, this will see those earning more than £150,000 pay an additional £1,200 in tax each year.

This means that, if you are a high earner, you may see your Income Tax bill increase from 6 April this year.

Furthermore, the chancellor also confirmed reductions to two key tax allowances: the Capital Gains Tax (CGT) exempt amount, and the Dividend Allowance.

Standing at £12,300 in 2022/23, the CGT exempt amount allows you to make capital gains before tax is due. However, this threshold will fall to £6,000 on 6 April, reducing the amount of capital gains you can receive before you have to pay CGT on them. This is set to fall again to £3,000 in April 2024.

Similarly, the Dividend Allowance allows you to earn dividend income without being subject to Dividend Tax. The Dividend Allowance in 2022/23 is £2,000, but will be reduced to £1,000 on 6 April, and then £500 in April 2024.

If you derive any of your income from areas such as liquidating shares or from dividend income, that could mean you’ll face a larger tax bill from April onwards.

That said, any investments held in an ISA are entirely free from Income Tax, CGT, and Dividend Tax. So, if you aren’t already holding your eligible assets in an ISA, now might be the time to make sure you do.

2. The energy price cap is set to rise again

Energy prices were not far from the headlines during 2022. Issues with supply and demand in wholesale energy prices – caused largely by Russia’s war in Ukraine reducing supplies of Russian gas – meant that costs rose substantially for wholesalers.

In turn, this saw the UK energy regulator, Ofgem, increase the energy price cap, the maximum amount suppliers can charge to consumers for gas and electricity.

The last confirmed increase from Ofgem on 24 November saw the price cap rise to £4,279 a year for the average household. This price is relevant for the period between 1 January and 31 March.

To help households with rising costs, the government introduced the Energy Price Guarantee (EPG), limiting the average household’s bills to £2,500 a year.

The next price cap review is set for 27 February and will dictate what the price cap will be from 1 April to 30 June. As supply and demand issues are still yet to improve, this means it is likely that the price cap will be increased again for this period.

That said, the chancellor confirmed on 17 November that the EPG is set to remain in place until March 2024. This will limit the average household’s bills to £3,000 a year, although this will still represent an annual increase of £500.

It’s important to remember that the energy price cap sets a maximum cost of energy per unit, meaning the total figure is for that of an “average” home. As a result, your bills could be higher or lower than the price cap, depending on how much energy you use.

Regardless, with energy costs increasing, it’s possible you’ll see an increase in your energy bills this year.

3. Interest rates could rise again

The other prevalent topic in the news throughout 2022 was that of inflation. The rising cost of goods and services in the UK was constantly in the headlines during the year, with the Office for National Statistics (ONS) reporting the Consumer Price Index to have risen by 10.5% in the 12 months to December 2022.

In an attempt to control surging inflation, the Bank of England (BoE) increased its base rate eight times throughout the year, seeing it rest at 3.5% at its final review of 2022 on 15 December.

The knock-on effect of rising interest rates for consumers is that the rates on savings accounts tend to increase. Meanwhile, the same is often true for mortgage rates, directly affecting the repayments of those on variable- and tracker-rate mortgages.

Moving forwards, many experts believe that rates could continue to rise in 2023 – in fact, we have seen another increase this year already, with the BoE increasing the base rate to 4% on 2 February, the highest level in 14 years.

There could be further rises to come, too. According to estimates published by Yahoo! News, rates will peak at 4.25% in 2023, before starting to fall later in the year.

If you have a mortgage on your home, these changes could see you pay more for it – figures from the Resolution Foundation published in the Guardian indicate that 3 million households are facing a £3,000-a-year increase in mortgage costs by the end of the 2023/24 financial year.

4. House prices could fall

One consequence of rising interest rates is that, with mortgage rates rising, house prices could fall this year as fewer people look to move on the property ladder.

Last month, MoneyWeek reported Halifax figures that indicated prices were already starting to soften at the end of 2022 – prices fell by 1.5% in December, marking the fourth consecutive month of declines.

Meanwhile, according to Zoopla figures published by the Times Money Mentor in January, house sellers reported that they were having to discount the prices of their homes by between 3% and 4% to ensure their sale went through.

The article also goes on to note predictions for house prices from some of the UK’s biggest mortgage lenders. For example, both Halifax and Lloyds Bank have predicted drops of 8% this year. Similarly, the Office for Budget Responsibility has forecasted a fall of 9% between 2022 and 2024.

Of course, no one can predict the future, and any of these predictions could be incorrect. But with house prices already having softened, we could see further falls throughout 2023.

Speak to us

If you’d like help managing your money in this new year, please do get in touch with us at Cordiner Wealth.

Email or call 0113 262 1242 to speak to an experienced adviser today.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. All contents are based on our understanding of HMRC legislation, which is subject to change.