What does the Autumn Statement mean for you?
This has been much awaited since the huge U-turns a month ago following the “mini-budget” announced by the former Chancellor Kwasi Kwarteng on 23 September. There has been significant speculation in the run-up to today, and it is safe to say that the announcement was as expected, with significant tax rises and spending cuts.
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
The capital gains tax allowance is reducing from April 2023 from £12,300 to £6,000 and then £3,000 in April 2024.
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.
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, but from April 2023, it will drop and earnings over £125,140 will now be subject to the 45% tax rate. This is said to push 250,000 more people into this band, increasing their tax by just over £1,200 per year.
As expected, the Chancellor has confirmed the state pension will be protected under the triple lock this year, increasing in April by 10.1%.
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.
The energy price guarantee scheme is to 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 announced on 23 September will remain in force till 31 March 2025, rather than indefinitely.
Spending cuts and increases
Spending cuts announced equate to around £30 billion, which is over half the amount that should be raised from the whole Autumn statement, but not all the announcements were cuts.
- £280 million invested in helping DWP combat benefits fraud
- Additional social care sector to receive additional £2.6 billion next year
- Overseas aid to target to drop to remain at 0.5% because it isn’t possible to return to the target of 0.7%
- Extra £2.2 billion invested in schools over the next two years
- £3.3 billion increase in the NHS budget in each of the next two years
To help identify further savings in departmental budgets, the government is launching an Efficiency and Savings Review.
- 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% without a referendum.
- The windfall tax on excessive profits of energy companies will be extended with an additional levy on electricity generators. This aims to raise £14 billion next year.
- The review of the state pension age will be brought forward into 2023.
- 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 was a far-reaching Autumn Statement with a lot to consider and factor into short- and long-term financial planning. None of these changes come in with immediate effect, so tax year-end planning will be even more essential. It is important to ensure you are in the best place possible to take advantage of any allowances, exemptions and reliefs available this year and prepare for the changes that come in over the next two years. The value of advice, both financial and non-financial, remains central to achieving your goals and aspirations.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
SJP Approved: 17/11/2022
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