What’s in it and how might it affect you?
On the 17th of November 2022, Jeremy Hunt revealed the details of his Autumn Statement. Its key aims are to tackle the developing cost-of-living crisis and revitalise the UK economy. The Chancellor announced his plans to raise taxes, as well as introducing spending cuts in his hope to find “fair solutions”, despite having to make “difficult decisions”.
Check out our summary of the main points below and with some comments on what this could practically mean for your finances.
- Income tax, national insurance and inheritance tax thresholds will be frozen until April 2028, which effectively increases the tax burden on individuals when the UK’s currently high rate of inflation is taken into account.
- Tax free allowance for dividends will be cut from £2,000 to £1,000 in April 2023, then to £500 from April 2024.
- The Capital Gains Tax annual exempt amount will be cut from £12,300 to £6,000 in April 2023 and then to just £3,000 from April 2024 – rates of CGT remain unchanged.
- From 2025, electric vehicles will no longer be exempt from excise duty.
- From 2023/24 the top 45% additional rate of income tax will be paid on earnings over £125,140, rather than £150,000. This does not apply to Scotland.
- Council Tax can be raised by local councils in England from 3% to 5%, without a local vote.
- £13.6 billion will be raised from windfall taxes to assist organisations with business rates, including a mixture of freezes and reliefs.
- Research and Development (R&D) additional deduction for SMEs will be cut from 130% to 86% from 1 April 2023 and the SME credit rate will decrease from 14.5% to 10%. Companies should therefore seek to maximise claims at the current rates up to 31 March 2023.
- For over 100 items, including some food products, import taxes will be removed for two years to reduce costs and support business supply chains.
- Plans for possible online sales tax scrapped, with retailers’ warehouses set to be hit by new business rate changes.
- Post-Brexit regulations will be reviewed, aiming to support emerging technologies.
- VAT registration threshold – which is already more than twice as high as the EU and OECD averages – is frozen at £85,000 until 2026.
- New one-off payments will be introduced with £900 going to households on means-tested benefits, £300 to pensioner households and £150 to individuals with disability benefit.
- Social housing rent increases in England will be capped at 7% from next April, instead of 11% due to inflation.
- The lifetime cap on social care costs England, which was due in October 2023 will be delayed by two years.
- Minimum wage for workers aged over 23 to increase by 9.7%, from £9.50 to £10.42 an hour, from April 2023.
- The pensions triple lock will be retained, meaning state pensions will rise 10.1% in April 2023.
- Benefits will rise in line with September’s inflation rate and the benefit cap will also increase.
- An additional £1 billion funding will be available to provide for further extension to the household support fund.
- The energy price guarantee will be kept for another year, beyond April 2023, at an average of £3,000 for a typical household, an increase from the current £2,500.
- Windfall tax on profits from oil and gas firms will increase from 25% to 35%; this change is due to last until March 2028.
- New, temporary 45% levy on electricity producers to come into place from January 2023.
Government & public spending
- The existing departmental spending will be maintained, but will grow at 1% a year for the next three years.
- NHS funding will be increased by £3.3 billion for the next two years.
- Budget for schools will be increase, with an extra £2.3 billion a year.
- Larger payments to devolved governments in Scotland, Wales and Northern Ireland will be made due to these increases.
- Despite economic pressures, the Chancellor has committed to the Cop26 programme including a 68% reduction in UK emissions by 2030.
- Social care will receive further investment, in an attempt to free-up more hospital beds. Funded by delayed reforms, an additional £1 billion will be allocated next year and £1.7 billion the year after.
- Defence spending to be retained at 2% of the national income.
- The budget for overseas aid spending will be kept at 0.5%, below the official target of 0.7%.
- The Chancellor promises £600 billion of investment over the next five years.
- Capital budgets will not be cut for the next two years, but then maintained in cash terms for the next three years.
- Work on HS2 will continue, alongside plans for new hospitals.
- More devolution deals in England to boost levelling-up.
- Plans for investment zones to be retained, with a focus on universities and areas requiring stimulation.
- The economy has slowed for two quarters in a row, meaning the Office for Budget Responsibility has deemed the UK to be in recession.
- Growth for this year is estimated at 4.2%, but the size of the economy will shrink by 1.4% in 2023.
- Growth of 1.3%, 2.6%, and 2.7% predicted for 2024, 2025 and 2026.
- UK’s inflation rate predicted to be 9.1% this year and 7.4% next year.
- Debt and spending targets have been extended from the current deadline of three years to five.
- Borrowing in the current financial year, 2022-23, will be 7.1% of GDP.
- The OBR estimates the gap between spending and income (the budget deficit) £177 billion in 2022-23.
- Two new fiscal rules were announced: underlying debt must fall as a percentage of GDP within five years; and public sector borrowing must be below 3% of GDP.