On Thursday 17 November, new chancellor Jeremy Hunt delivered his first autumn statement. Hunt’s speech came at a tricky time for the UK economy. Inflation is at a 41-year high and the Bank of England (BoE) expects the economy to be in a recession for a prolonged period. Hunt said his plan is to “strengthen our public finances, bring down inflation and protect jobs”.
We look at the key points of the autumn statement, and what they might mean for you.
As part of his plan to raise tax revenue, the chancellor announced reductions to two key tax allowances. These two combined measures will raise more than £1.2 billion a year from April 2025.
The Capital Gains Tax (CGT) annual exempt amount will fall from £12,300 to £6,000 in April 2023, and to £3,000 in April 2024. This means that you will only be able to make profits of £6,000 on non-ISA investments in the 2023/24 tax year before CGT is due. This might affect things like company shares or second homes.
The Dividend Allowance will reduce from £2,000 to £1,000 in April 2023, and then to £500 in April 2024. This is the amount you can earn from dividends before you pay Dividend Tax. If you receive any income from dividends, it’s likely that you will pay more tax on this from April 2023 onwards.
The Inheritance Tax (IHT) nil-rate band and additional residence nil-rate band were already frozen until 2026 and the chancellor announced an extension to this freeze. This means that the nil-rate bands will remain at these levels until at least 2028. As a reminder, the current levels are:
Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an IHT liability. As house prices and asset values rise, it is likely that more and more estates will face an IHT bill over the next five years.
In a considerable change of direction from the former administration, Hunt reduced the threshold at which individuals pay additional-rate Income Tax.
Whilst Kwasi Kwarteng abolished the additional rate of tax (45%), Hunt swiftly reversed it. His announcement means higher earners will pay 45% tax on more of their earnings. The 45% rate will now apply for earnings above £125,140 rather than the previous level of £150,000. It means if you earn £150,000 or more, you will pay just over £1,200 more in Income Tax each year.
Hunt also froze the Income Tax Personal Allowance at the current level of £12,570 until 2028. This is the amount an individual can typically earn before paying Income Tax. He also fixed the higher-rate threshold at £50,270 and the National Insurance thresholds at their current level until 2028.
All these measures are likely to increase your personal tax burden. As earnings rise, more of your income will be subject to tax than if the allowances had risen in line with inflation.
The State Pension 'triple lock' stays
Under the 'triple lock', the State Pension increases each year by the higher of either:
The new budget ended months of speculation about the Government's commitment to this. Hunt stated he would increase the State Pension in line with inflation. This means pensioners can expect a boost of just over 10% to their State Pension from April 2023. For someone on the full, new State Pension, that will represent an additional payment of more than £900 a year.
Pension Credit will also rise by 10.1% in April 2023 and benefits will be uprated by inflation, too. As a result around 19 million families will see their benefit payments increase from April 2023.
An increase in the Energy Price Guarantee
The Government’s Energy Price Guarantee will continue in its present guise until April 2023. Under the guarantee, for six months from 1 October 2022, the average household will pay energy bills of around £2,500 a year.
The scheme will then become less generous from April 2023. The guarantee will rise to £3,000 for a further 12 months, meaning your energy bills will likely rise again in the spring.
The Government says this equates to an average of £500 support for households in 2023/24. There will be extra support for more vulnerable households.
Jeremy Hunt announced a significant increase in windfall taxes. The oil and gas companies' tax rate will increase from 25% to 35% of profits on UK operations from January 2023 until March 2028, extended from December 2025. There will also be a 45% tax on the profits of older renewable and nuclear electricity generation. Together, these measures will raise more than £55 billion from this year until 2027/28.
In September’s mini-Budget, Kwasi Kwarteng announced some increases in the thresholds at which Stamp Duty would be payable. The £125,000 threshold increased to £250,000 and the minimum threshold for first-time buyers increased from £300,000 to £450,000.
Jeremy Hunt warned that while these changes will remain, they will now be time-limited, ending on 31 March 2025. They are designed “to support the housing market and the hundreds of thousands of jobs and businesses which rely on it”.
Hunt announced the largest-ever rise in the UK’s national living wage. For workers aged 23 and over, it will rise by 9.7% to £10.42 an hour from April 2023. This represents an increase of more than £1,600 to the annual earnings of a full-time worker on the national living wage. More than 2 million workers should expect to benefit.
From April 2025, electric cars, vans, and motorcycles will begin to pay Vehicle Excise Duty. The Government says that this will “ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate”.
For adult social care, the help the most vulnerable Hunt announced:
He also committed an extra £3.3 billion in 2023/24 and a further £3.3 billion in 2024/25 to improve the performance of the NHS. The lifetime cap on social care costs in England, due to come into force in October 2023, will be delayed by two years.
There will be an increase to the education budget of £2.3 billion in 2023/24 and £2.3 billion the year after. This takes the core schools' budget to a total of £58.8 billion in 2024/25.
There will be a £13.6 billion package of business rates support over the next five years.:
Additionally, the relief for retail, hospitality and leisure sectors will extend and increase to 75%.
As confirmed in October 2022, the main rate of Corporation Tax will increase to 25% from April 2023.
The Chancellor confirmed the Government’s commitment to:
If you have any questions about how the autumn statement will affect you and your finances, please get in touch. All information is from the autumn statement 2022 document and the Government’s autumn statement news bulletin.
The content of this autumn statement summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
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