Autumn Statement 2022
Following a continued period of upheaval in the markets, Jeremy Hunt started his week by warning that we’re all going to pay more tax in the coming months following his Autumn Statement.
The Autumn Statement was always likely to include tax rises and spending cuts as the new Chancellor attempted to restore stability and calm to the economy. The consistent message coming out of 11 Downing Street since its latest occupant took up residence has been the same, warning us all that there is no easy or fast solution to the tough times ahead.
The pre-briefing of many aspects of the speech reduced the risk of spooking the markets again, meaning there were few huge shocks, unlike the mini-budget in September.
An apparent Budget deficit of £50 billion isn’t an easy one to fill!
Short and long term plans were mentioned in the build-up that were aimed at curbing inflation, controlling high energy prices and supporting those on the lowest incomes. Help for energy bills for next winter as well as this one were also included in the pre-announcement briefings.
Other rumours around the Autumn Statement included an extension to the current freeze until 2026 of Income Tax thresholds and a similar freeze of Inheritance Tax thresholds. A 50% reduction in the current Capital Gains Tax allowance was also mentioned, as was the removal of tax relief on pensions contributions for higher rate earners. A windfall tax of up to 30% on oil and gas companies was mooted, that would last until 2018, which may have been one of the more popular measures the Chancellor could announce.
Many column inches were also filled with discussions around the ethics of breaking the ‘Triple Lock’ for pensions. This promise, introduced by the coalition government in 2011, guarantees the basic state pension will rise by a minimum of 2.5%, the rate of inflation or average pensions growth, whichever is largest.
For Directors, rumours of a 50% cut in the current dividend allowance, combined with an increase of 1.5% in the dividend tax rate would have been concerning. This may well call into question the previously preferred method of payment for Directors of salary and dividends. We’ll be keeping a close eye on this one, which would be a drastic hit for those who take significant entrepreneurial risk.
What we did know in advance was that the new Chancellor’s Autumn Statement was going to be a tough balancing act, and that he’ll face significant criticism regardless of what he comes up with.
One of the key concerns from the markets was the lack of reference to the Office of Budget Responsibility (OBR) in the earlier mini-budget, and today’s speech included frequent mentions of the accompanying OBR forecast.
The three priorities for the measure included in the statement were outlined as ‘stability, growth and public services’.
As mentioned above, there had been a lot of pre-briefing of the content of today’s Autumn Statement, but here are the key announcements:
- Inflation is expected to reduce to 7.4% next year.
- We are now in recession, which will be reflected by one third of the global economy by next year, according to the International Monetary Fund.
- Unemployment is expected to rise to 4.9% in 2024.
- Personal Tax – The 45p threshold for the highest earners will reduce to £125,140.
- Other Personal Tax, National Insurance and Inheritance Tax allowances will be frozen until April 2028.
- Unearned income (Dividend Allowance) will reduce from £2,000 to £1,000 next year, and £500 from April 2024.
- Capital Gains Tax Allowance will reduce from £12,300 to £6,000 next year and £3,000 from April 2024.
- Electric Cars will no longer be exempt from Vehicle Excise Duty from April 2025.
- Company Car tax levels remain unchanged.
- Stamp Duty reductions will remain in place until 31st March 2025, and will then be phased out.
- Employers National Insurance contributions will be frozen until April 2028
- Employment Allowance remain unchanged at £5,000.
- R&D tax credit – The enhanced deduction rate is reducing from 130% to 86% and the tax credit claimable if you make a loss reduces from 14.5% to 10%. For large companies the expenditure credit increases from 13% to 20%.
- Public Funding of R&D will increase by £20billion by 2024/25.
- Business Rates – revaluation in April 2023 to go ahead, but with a transitional Relief Scheme to support businesses with a £14billion tax cut over the next five years.
- Support for household energy bills is reducing, with typical bills rising from £2,500 to £3,000 per year, though there will be extra support for pensioners, those receiving means tested benefits and those receiving disability benefits.
- This support will be extended for another 12 months.
- By the end of the year, there will be a new targeted approach to support businesses from April 2023.
- National Living Wage will increase in April 2023 to £10.42 per hour.
- The Pensions Triple Lock will not be broken, with the State Pension increasing in line with inflation in April 2023.
- A new Energy Efficiency Taskforce will lead the UK towards reducing energy consumption by 15% from 2025. £6billion will come from Government to fund this process.
- Capital Budgets remain unchanged for the next two years and maintained for following three years.
- Regulation changes to come by end of 2023 in five growth industries: digital technology, life sciences, green industries, financial services and advanced manufacturing.
- Import tariffs to be lifted on over 100 good used by UK businesses in production processes.
- Investment zones will leverage research strengths and encourage ‘clusters’ of new growth industries.
To access our summary, click on the button below:
If you’d like to see the full guidance from the Autumn Statement, you can see that here.
There’s always additional detail that’s published after the Chancellor’s speech has been delivered. We’ll work through this and be in touch to clarify or provide extra information as appropriate.
If you’d like to discuss the impact of the announcements on your personal or business affairs, or anything else, please get in touch.
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