Autumn Statement November 2022
November Fiscal Statement
Yesterday, the Chancellor Jeremy Hunt attempted to offer clarity on how Rishi Sunak’s government plan to restore order to Britain’s public finances. Jeremy Hunt succeeded Kwasi Kwarteng as Chancellor just over a month ago following the latter’s disastrous “mini-Budget” of 23 September.
Yesterday’s Autumn Statement comes just a day after the Office for National Statistics announced that inflation has now reached 11.1% which is a 40 year high. The Chancellor had warned the electorate to be prepared for tough times ahead, recognising in his opening statement that the UK is now in recession. The tax measures had been largely leaked over the last week or so, with the Chancellor employing fiscal drag by allowing the stagnation of benefits and relief to as late as 2028. In real terms that means that all working people are going to take some of the pain, not necessarily just the people with ‘the broadest shoulders’. However with the reduction in the threshold for additional rate tax payers, UK entrepreneurs and business owners will bear a considerable brunt with the introduction of this measure, alongside the increase in corporation tax next April.
I suspect that the Chancellor is well aware that if taxes rise too much, people will find ways to avoid paying them and the tax take will reduce rather than increase. Therefore the measures that the Chancellor announced will go some way to filling the hole but not completely.
The biggest generator of tax seem to be the windfall taxes that the energy companies will pay – raising the amount of tax payable for some to an eye watering 75% on profits – which the Chancellor recognises is not sustainable over the longer term due to the detrimental impact on innovation and investment.
Here we give you a brief summary of yesetrday’s announcements.
Income tax – more people to pay top rate
The Chancellor announced that the threshold for when the highest earners start paying the top rate of tax (45%) will decrease from £150,000 to £125,140. Therefore those earning £125,140 or more will pay approximately £1,200 more a year.
Income tax – personal allowance to be frozen
As expected, the income tax personal allowance thresholds will be frozen until 2028.
The thresholds were already frozen until 2026 and the extension to 2028 means that as wages rise in an effort to keep pace with inflation, the proportion of earnings that individuals pay tax on will increasingly bring more people into higher tax brackets.
National Insurance and Inheritance tax
The main National Insurance and Inheritance tax thresholds will also be frozen for a further two years, until April 2028.
Tax free allowance for dividends halved
The individual tax free dividend allowance will be cut from £2,000 to £1,000 next year and from April 2024 it will reduce to £500.
Tax free allowance for capital gains cut
Tax free allowance for capital gains will be cut from £12,000 to £6,000 from April 2023 and £3,000 from April 2024.
Research and Development (R&D) tax reliefs
For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%. The small and medium-sized enterprises (SME) deduction will decrease from 230% to 186% of qualifying R&D expenditure, and the SME surrender rate will decrease from 14.5% to 10%.
Super-deduction will end
As the main rate of Corporation Tax will increase, previously proposed technical changes to the related capital allowance super-deduction rules are no longer required – the super-deduction benefit will end in April 2023.
Stamp Duty cut will end in 2025
The Chancellor noted that the OBR expects housing activity to slow over the next two years, so the Stamp Duty cuts announced in the mini-budget will remain in place but only until 31st March 2025.
Expanded windfall tax for energy firms’ profits
From 1 January until March 2028 the energy industry will be hit with an expanded windfall tax of 35% up from 25%. Mr Hunt said that he has no objection to taxing windfall profits caused by unexpected increases in energy prices but that such taxes must be temporary.
There is also going to be a temporary 45% levy on electricity generators – the chancellor says that together these taxes will raise £14bn next year.
Vehicle Excise Duty will apply to electric vehicles
Electric vehicles will not be exempt from Vehicle Excise Duty from April 2025. This is to make the motoring tax system “fairer” according to the Chancellor.
Energy bills set to rise from April 2023
Whilst the help for energy bills will be extended it is going to be less generous. Millions of households and businesses will see their energy bills go escalate.
Increase to National Living Wage
The National Living Wage will be increased from £9.50 an hour for over-23s to £10.42 next April – this will be a blow to business who are already staggering under the increased energy and production costs as a result of inflation. Making employment more expensive will no doubt contribute to the £1m extra unemployed, predicted for next year.
Benefits and pensions
In-keeping with previous promises by Rishi Sunak when he was Chancellor, benefits will increase in line with September’s inflation figure of 10.1%.
Yesterday, it was confirmed that pensions – like benefits – will also rise in line with September’s inflation rate of 10.1%. As a result, the government is sticking to its “triple lock” on the state pension.
As the finer details emerge over the coming days and weeks, we will of course keep you updated on our website and our social media channels.
If you do have any questions from yesterday’s announcement, please do not hesitate to get in touch with your usual relationship manager, or email email@example.com
The information was correct at time of publishing but may now be out of date.