Chancellor Jeremy Hunt has delivered an Autumn budget aimed at stabilising the economy and to address increasing inflation.
Spending cuts totalling £30bn have been announced while tax rises equate to £24bn. This is in light of October’s inflation rate of 11.1% and warnings from the Bank of England that the UK is in a 2-year long recession, the longest on record.
Spending review:
There will be spending squeezes across government departments, but the health budget will be protected. There will be targeted support for those on low incomes with the aid of a “work coach”. Households will see their energy bills rise from April when the government’s package of support becomes less generous. Typical users of gas and electricity will pay £3,000, up from £2,500, as the Energy Price Guarantee rises.
Increased support:
An additional £2.3bn will be spent annually to support schools in England. The NHS budget will rise by £3.3bn. Schools and the NHS in Scotland, Wales and Northern Ireland will get an additional £1.5bn, £1.2bn and £650m respectively annually, going forward. The National Living Wage will be increased from the current level at £9.50 an hour for over-23s to £10.42, from April 2023. The state pension, benefits and tax credits will rise by 10.1%, in line with inflation. Additional cost of living payments will be made of £900 to those on means-tested benefits, £300 for pensioners and £150 for those on disability benefits.
Tax rises:
The top rate of tax of 45% will now be applicable for income of £125,140, down from £150,000. Freezing thresholds for income tax and national insurance means millions will be paying more tax on their incomes. The windfall tax will increase from 25% up to 35%. Capital Gains Tax Annual Exempt amount reduced from £12,300 to £6,000 from April 2023, and to £3,000 from April 2024. Electric vehicles will no longer be exempt from the Vehicle Excise Duty from April 2025. Stamp duty cuts announced previously will now only be in place until March 2025.
In addition:
The government remains committed to a 68% reduction in emissions by 2030, a promise made at COP26. Low-carbon energy remains a priority. As such, a new nuclear plant at Sizewell C will begin generating up to 7% of the UK’s electricity needs by the 2030s. Northern Powerhouse Rail, HS2 and the East West Rail projects will go ahead as planned.
The OBR (Office for Budget Responsibility) have confirmed that measures announced today will contribute to a shallower recession than initially feared.
Should you be concerned about any of the impacts to your personal finances, please do seek professional advice.
Here is a bullet list of the key changes:-
- The main income tax allowances and thresholds, the main national insurance thresholds plus the inheritance tax nil rate bands will stay at their current levels for an extra two years to April 2028.
- The threshold for the 45% additional rate of income tax will reduce from £150,000 to £125,140 from April 2023.
- The dividend allowance will reduce from £2,000 to £1,000 from April 2023 and be halved again to £500 from April 2024. The capital gains tax annual exempt amount will be cut from £12,300 to £6,000 for 2023/24 and halved to £3,000 from April 2024.
- The government’s energy price guarantee will be adjusted from April 2023 so that the typical household will pay £3,000 a year.
- The state pension, pension credit, universal credit (UC), the benefit cap and certain other benefits will increase by 10.1% in line with CPI inflation to September 2022.
- Business rates bills in England will be updated from April 2023 to reflect April 2021 property values and there will be a £13.6 billion package of targeted support for businesses over the next five years.
- Research and development tax reliefs will be reformed with respect to expenditure incurred from 1 April 2023.
- The windfall profits of oil and gas companies will be subject to further tax increases and a new levy will apply to the ‘extraordinary returns’ of low-carbon electricity generators.
