Yesterday the Chancellor of the Exchequer, Jeremy Hunt, presented the Autumn Statement and medium-term fiscal plan to Parliament.
As expected following the U-turn from Kwasi Kwarteng’s ‘mini-budget’, there have been significant tax rises and spending cuts. We have prepared a summary of the announcement and how it will affect you.
Tax rises and benefit increases
Freezing of allowances and bands is a stealth tax, with many thresholds already frozen, with these freezes extended for at least a further two years.
This includes:
- Income tax basic and higher rate bands
- National insurance rate bands
- Inheritance tax nil rate band
- VAT thresholds
Capital Gains
- The capital gains tax allowance is reducing from April 2023 from £12,300 to £6,000 and then £3,000 in April 2024.
Dividend Tax
- The dividend tax allowance will reduce next tax year from £2,000 to £1,000 and then to £500 in April 2024. This means that those receiving dividends that are not in a wrapper, such as a pension or ISA, will see increased taxation over the next two years.
Additional Income Tax
- The Additional income tax band will be reduced so that the point at which income tax is paid at the rate of 45% will be lower. This is currently paid on earnings over £150,000, however from April 2023, it will drop and earnings over £125,140 will now be subject to the 45% tax rate.
State Pension
- As expected, the state pension will be protected under the triple lock this year, increasing in April by 10.1%.
Benefits
- Other state benefits, including working-age benefits, benefits to help with additional needs arising from disability, carers’ benefits, pensioner premiums in income-related benefits, Statutory Payments, and Additional State Pension have also been confirmed to rise with the consumer prices index, which will mean a 10.1% increase in April. The benefits cap will also increase with inflation.
In addition to increasing benefits, further cost of living payments were announced, which are worth:
- £300 for pensioners
- £900 for those on means-tested benefits
- £150 for those on disability benefits
Energy Price Guarantee Scheme
- The energy price guarantee scheme will be extended for a further 12 months from April, although at a slightly higher rate of £3,000 for the average household, with a doubling of the level of support for those using alternative fuels.
Stamp Duty Cuts
- Stamp duty cuts announced on 23 September will remain in force till 31 March 2025, rather than indefinitely.
Further Changes
- The national living wage is increasing, and those over the age of 23 will see an increase from £9.50ph to £10.42ph
- Local Authorities can increase council tax by 3%
- The windfall tax on excessive profits of energy companies will be extended with an additional levy on electricity generators
- Electric cars will have to pay vehicle excise duty from 2025
- Social rent will be capped at 7% instead of the usual 1% above inflation
- Social care charging reforms are being deferred until 2025, from the planned rollout date of October 2023
This far-reaching statement will have a number of implications and therefore it’s important that you are best placed to take advantage of any allowances, exemptions and reliefs.
To speak to us about how this statement affects you or anything else, please do not hesitate to get in touch.
