The Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement to Parliament yesterday, following several weeks of commentary indicating that everyone will have to pay more tax.
Despite this, there were no outright increases to headline tax rates with the changes being of a more stealthy nature; freezing or reductions of allowances and exemptions.
We have outlined below the main announcements.
OBR economic forecasts
The Office of Budget Responsibility expects the economy will fall into recession (we're probably already in one but don't have the data to prove it yet) and living standards will fall 7% over the next two years.
Growth
2022: +4.2%
2023: -1.4%
2024: +1.3%
2025: +2.6%
2026: +2.7%
2027: +1.2%
CPI Inflation
2022: 9.1%
2023: 7.4%
2024: 0.6%
2025: -0.8%
2026: 0.2%
2027: 1.7%
Public sector net borrowing
2022/2023: 7.1%
2023/2024: 5.5%
2024/2025: 3.2%
2025/2026: 2.8%
2026/2027: 2.9%
2027/2028: 2.4%
Unemployment
2022: 3.7%
2023: 4.1%
2024: 4.9%
2025: 4.7%
2026: 4.3%
2027: 4.2%
Tax
There will be no change to the headline rates of tax.
The additional rate threshold for income tax will reduce from £150,000 to £125,140 from April 2023.
The income tax personal allowance and higher rate threshold together with National Insurance and IHT thresholds will remain unchanged until April 2028.
The dividend tax allowance will reduce from £2000 to £1000 in April 2023 and then to £500 in April 2024. (This has been £5,000 when it was introduced a few years ago).
The CGT annual exempt amount will reduce from £12,300 to £6000 in April 2023 and then to £3000 in April 2024. For trusts, the exempt amount will be half this amount.
The Stamp Duty changes announced in the ‘mini-Budget’ will now be temporary and end on 31 March 2025.
The windfall tax on the energy industry is to be expanded and increased from 25% to 35% in January 2023 and there will be a new temporary 45% levy on electricity generators.
Electric vehicles will stop being exempt from Vehicle Excise Duty from April 2025.
Local councils in England will have additional flexibility in setting council tax by increasing the referendum limit for increases in council tax to 3% a year from April 2023. In addition, councils with social care responsibilities will be able to increase the adult social care component by up to 2% a year.
Business rates in England will be updated in April 2023 to reflect changes in property values since the last revaluation in 2017 with a package of targeted support over five years to support businesses as they transition to their new bills.
Welfare, work and pensions
Help with energy bills is to continue after April 2023 but it will be less generous. A household using a typical amount of gas and electricity will pay £3000 a year up from £2500 as the Energy Price Guarantee rises.
The National Living Wage is to increase from £9.50 to £10.42 an hour for people over age 23 from 1 April 2023. The National Living Wage for under 23s will also be increased by around 10%.
State Pensions and state benefits to be uprated by 10.1% in April 2023 in line with inflation.
The benefit cap will be raised by 10.1% from April 2023.
There will be targeted support with the cost of living for those on low incomes, disability benefits and pensioners. Additional payments of £900 will be paid to those on means-tested benefits, £300 to pensioner households and £150 to people on disability benefits.
Rent increases in the social rented sector will be capped at 7%.
The Government’s Review of the State Pension age is to be published in April 2023.
Social care
Social care reforms including the £86,000 cap on personal care costs to be delayed by two years to October 2025.
Local government
New devolution deals mean there will be an elected mayor in Suffolk and proposals for mayors in Cornwall, Norfolk and an expanded mayoral deal in the north-east of England.
‘Trailblazer’ devolution deals with Greater Manchester and the West Midlands Combined Authorities are to come into force by early 2023 which will devolve powers such as skills, transport and housing. These deals are to be a blueprint for other areas in England to follow.
Regulation
The Government is to review retained EU law to identify changes that can be made in what are seen as the key growth industries: digital technology, life sciences, green industries, financial services and advanced manufacturing.
Comment
Much of the rhetoric in recent weeks about everyone having to share the pain and pay more tax once again seems to have been talking up the severity in advance to create a sense of relief when the announcements turned out to be, on the face of it, not so bad; with no changes to tax rates themselves.
However as always, the devil is in the detail and with inflation continuing to run quite high while allowances and exemptions have been cut or frozen, more tax will be payable by most but the lack of transparency of the changes will make it difficult to work out the true cost.
We will be working hard in the background to consider the implications of the Autumn Statement for our clients, and will take action as necessary once the announcements become law.
If you have any immediate questions or concerns about how the Autumn Statement might affect you, please do get in touch.
Best wishes,
Michael Roberts FPFS
Chartered Financial Planner and Director
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