With 2022 seeing record high inflation and the UK heading into recession, today’s Autumn Statement was always going to be a very tricky balancing act for our new PM Rishi Sunak and his Chancellor Jeremy Hunt.
With the previous mini budget resulting in market turmoil, followed by the subsequent reversal of most of the measures. There would understandably be a wish to tread carefully with today’s announcements. It had been confirmed in media rounds, undertaken by the Chancellor in the last few days, that taxes would need to rise to allow the country’s books to be balanced. But, there had been very few clear indications as to in what areas these rises may come and whether they would be direct or indirect taxation.
When the Chancellor finally stood up, the key announcements were as follows:
- The threshold at which the 45p tax rate becomes payable to will reduce to £125,140 from April 2023. Higher earners can therefore expect to pay £1,200 more a year
- The annual dividend allowance will fall from £2,000 to £1,000 from April 2023, and to £500 from April 2024
- Similarly the Capital Gains Tax Annual Exempt Amount will reduce from £12,300 to £6,000 from April 2023 and then to £3,000 from April 2024.
- The income tax personal allowance threshold will now be frozen until 2028, rather than 2026 as previously announced
- Main National Insurance and inheritance tax thresholds will also be frozen for further a two years, until April 2028
- Previously announced increases in various stamp duty thresholds will now only be temporary and end in March 2025
- Electric cars will pay road tax from April 2025
- Energy profits levy rises to 35% from 25% with effect from January 2023 and will apply until March 2028.
- This levy is also being temporarily extended to electricity companies at a 45% rate
- In a welcome move to help those with lower income state pension payments and means-tested and disability benefits have also been confirmed to increase by 10.1%, in line with inflation
- UK national living wage for people over 23 to increase from £9.50 to £10.42 an hour from next April
There was a clear theme that larger companies and those with higher levels of income have the broadest shoulders, and therefore should bear a larger portion of the burden of increased taxes. This is no real surprise, given the way in which the mini budget proposal of abolishing the 45% rate of tax was received. In what is likely to come as a relief to many, the return of capital gains tax rates being linked to income tax rates that had been widely predicted did not come about.