There were few surprises in Chancellor Jeremy Hunt’s first Autumn Statement, with warnings that tough decisions would need to be made due to a grim economic picture heavily trailed before his speech in Parliament.
Most of the measures announced by Mr Hunt had been briefed to the press beforehand, so it was little surprise when a series of frozen tax thresholds increased the burden on UK taxpayers.
The Chancellor announced that both the income tax personal allowance and higher rate thresholds will be frozen for a further two years until April 2028. In addition, basic national insurance and inheritance tax (IHT) thresholds have also been frozen until April 2028.
The threshold for the top 45% additional rate of income tax was cut to £125,140 from £150,000.
The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024, while the capital gains tax (CGT) exemption will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.
These measures are part of what the Chancellor called providing ‘fair solutions’ with his plan to tackle the cost-of-living crisis and rebuild the UK economy. The Chancellor said his priorities are stability, growth and public services, which required ‘difficult decisions’.
As well as increasing the personal tax burden, the Chancellor also increased the windfall tax on the profits of oil and gas firms. This was increased from 25% to 35% and extended until March 2028.
There will also be a new ‘temporary’ tax on companies that generate electricity, which will apply from January.
As energy prices continue to drive inflation, the Chancellor confirmed that the Energy Price Guarantee will be extended for a year from April 2023. However, the level at which typical bills are capped will increase to £3,000 a year from £2,500.
Business rates support
The Chancellor also announced a £13.6 billion package of support for business rates payers in England. To protect businesses from rising inflation, the multiplier will be frozen in 2023/24, while relief for 230,000 businesses in the retail, hospitality and leisure sectors was also increased from 50% to 75% for 2023.
Falling living standards
As the Chancellor finished his statement the Office for Budget Responsibility (OBR) published a grim forecast for the UK economy.
The OBR says that despite the new support with energy bills, living standards are going to fall by 7% over the next two years, which will wipe out eight years of growth.
It said that while the Chancellor’s fiscal support over the next two years cushions the blow of higher energy prices the economy will still fall into recession.
The Chancellor said:
There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.
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