Jeremy Hunt made his autumn statement to the House of Commons on November 17th, barely 34 days after taking office.
Tax increases and spending reductions were anticipated if the Government was to hit a new fiscal rule that says national debt should be falling after five years of a budget, which totalled £55 billion.
The important talking points are listed below.
Hunt began his Autumn Statement by providing a summary of the economy as reported by the Office for Budget and Responsibility (OBR).
The economy will have expanded by 4.2% in 2022, but it is presently in a recession that will last long into 2023. According to the OBR, this amounts to a 1.4% contraction by the following year.
“Without the energy price guarantee and other measures, the recession would be 1.1 percentage points deeper”, it added.
Following that, GDP will grow by 1.3%, 2.6%, and 2.7% during the subsequent years, bringing the economy completely back to its pre-pandemic level in the fourth quarter of 2024 while inflation falls to the government’s target of 2% in 2027.
But in 2023–2024, high inflation will erase the eight years of gains by reducing earnings and living standards by 7%.
Hunt then got to the heart of the Autumn Statement by making a number of announcements pertaining to personal taxation.
These included a statement that, starting in April 2023, the threshold for the additional rate of tax would drop from £150,000 to £125,140, bringing 250,000 more people within the tax band.
The annual exempt allowance, also referred to as the capital gains tax allowance, will be lowered to £6,000 in the 2023-24 tax year and then halved to £3,000 for the 2024–2025 tax year from its current £12,300 level.
In April 2023, the tax-free dividend amount will likewise decrease from £2,000 to £1,000. It will once more be lowered to £500 in April 2024.
Hunt also announced a number of tax threshold freezes to boost tax revenues. These were:
- Income tax: The personal allowance will stay at £12,570 for a further two years till 2028. When Rishi Sunak was the Chancellor, he put the freeze into effect until 2026.
- National Insurance: From now until 2028, the threshold at which people must pay National Insurance contributions will stay at £12,570.
- The inheritance tax threshold has been locked at £325,000 since April 2009 and is likewise suspended until 2028.
A number of payments to help families with their energy costs as well as the fact that starting in 2025, electric vehicles won’t be exempt from the vehicle excise tax were also made public.
In addition to the April 2023 business rates reassessment, Hunt announced a number of changes to help businesses with the revaluation, including:
- Multipliers will be frozen in 2023/24 at 49.9p and 51.2p, rather than increasing to 52.9p and 54.2p.
- Relief for retail, hospitality and leisure will increase from 50% to 75%. That equates to £110,000 per business in 2023/24.
- A transactional relief scheme will place ‘upward caps’ on bill increases caused by changes to rateable values at the 2023 revaluation.
- A ‘supporting small business scheme’ will cap bill increases at £600 per year for certain small businesses.
According to the Chancellor, the SME credit rate will drop from 14.5% to 10% and the additional deduction for SME R&D relief will be cut from 130% to 86%.
The increase in the R&D spending credit from 13% to 20%, according to Hunt, was done to “rebalance” the two reliefs and to stop bogus claims in the SME scheme.
Talk to us about your business and how the Autumn Statement will affect you.