Autumn Statement: 17 November 202217 November 2022
At 11.30am on 17 November, the Chancellor, Jeremy Hunt MP, set out his plan for stabilising the UK economy and tackling rising inflation. After former Chancellor Kwasi Kwarteng's mini-budget on 23 September triggered market turmoil, it was clear that decisive action would be needed to restore credibility and confidence in the UK, and to try to fill the fiscal black hole, which the Treasury has estimated stands at around £54bn. These aims have a price, however, and taking money out of the economy now through spending cuts and tax rises risks making a recession even more difficult. An unenviable dilemma indeed, and it was evident from the Chancellor's speech that there were no easy answers.
We have collated a summary of some of the key announcements which we hope will be helpful.
State of the UK economy
- The Office for Budget Responsibility (OBR) judges the UK to be in recession (meaning that economic growth has slowed for two quarters in a row)
- The OBR predicts growth of 4.2% overall in 2022, shrinkage of 1.4% in 2023, and growth of 1.3%, 2.6% and 2.7% in 2024, 2025 and 2026
- Inflation is predicted to be 9.1% this year and 7.4% in 2023
- Unemployment is predicted to rise from 3.6% currently to 4.9% in 2024
- The State Pension, benefits and tax credits will rise by 10.1% from April 2023, in line with September's inflation figure and maintaining the State Pension 'triple lock'
- Household energy price cap extended for one year beyond April 2023, although less generous, with typical bills capped at £3,000 pa rather than £2,500 pa
- The rate at which the highest earners start to pay additional rate income tax (45% / 39.35% on dividend income) will be lowered from April 2023, from £150,000 gross pa to £125,140 gross pa
- The personal income tax allowance remains frozen at £12,570 until April 2028 (originally planned to be until April 2026)
- The higher rate income tax threshold remains frozen at £50,270 until April 2028
- Inheritance tax thresholds remain frozen at £325,000 (standard nil rate band) and £175,000 (residence nil rate band if applicable) until April 2028
- Main National Insurance thresholds frozen until April 2028
- The annual exempt amount for capital gains (CGT) will reduce from its current level of £12,300 to £6,000 from April 2023 and £3,000 from April 2024.
- The dividend allowance (the amount of dividends an individual can receive before paying tax) will reduce from its current level of £2,000 gross pa to £1,000 gross pa from April 2023 and £500 gross pa from April 2024
- The National Living Wage will increase from £9.50 to £10.42 per hour from April 2023. This is a 9.7% increase in the minimum wage for all aged 23 and over.
- The Stamp Duty cuts first announced in the mini-budget will end in March 2025
- Electric vehicles (EVs) will from April 2025 no longer be exempt from vehicle excise duty
- The lifetime cap on social care costs due in England in October 2023 has been delayed by two years
- No changes to pensions or ISAs
- Employer National Insurance Contribution threshold frozen to April 2028
- Employment Allowance, allowing eligible employers to reduce their annual National Insurance liability, retained at £5,000 until March 2026
- Windfall tax on profits of oil and gas companies increased from 25% to 35% and extended to March 2028, plus a new 'temporary' 45% tax on excess returns of electricity generating companies to apply from January 2023 to March 2028
- The VAT threshold remains unchanged
- The Corporation Tax increase to 25% from 19% will go ahead at the start of the new tax year
UK infrastructure and public spending
Amongst other initiatives:
- Commitment to energy independence and energy efficiency; as an example, the new nuclear plant at Sizewell C will go ahead, and a new national ambition has been announced to reduce energy consumption from buildings and industry by 15% by 2030
- Northern Powerhouse rail and HS2 projects will go ahead
- Schools will receive an extra £2.3bn next year and the year after
- The NHS budget will increase by an extra £3.3bn over each of the next two years
- Defence spending will be maintained at 2% of national income
- Overseas aid will be kept at 0.5% of national income for the next five years (below the official 0.7% target)
…and for full details
The notes above are only part of the headlines revealed in today's speech, and full details may be found here: https://www.gov.uk/government/publications/autumn-statement-2022-documents
Chapters Financial is not responsible for the content of external websites.
We hope this update is helpful in looking at the Autumn Statement 2022. It is clear that many of these tax changes and freezes will see an effective tax rise across most sectors of the UK, and the Chancellor freely admitted this at the start of his speech.
If you need help with your own financial planning, then please contact the team at Chapters Financial Limited and please note that no individual advice has been provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899