17 Nov 2022
On 17 November 2022, Chancellor Jeremy Hunt delivered his first fiscal statement since taking office. Hunt had already reversed a handful of his predecessor Kwasi Kawrtang’s policies. As predicted, in the Autumn budget he unveiled a series of further tax rises and spending cuts, amounting to approximately £55 billion. So, what does this week’s Autumn Statement mean for businesses and workers?
Tax-free dividend allowance decrease
Dividend tax rate increase
Tax-free capital gains tax decrease
Income tax freeze extended
Highest earner tax threshold decrease
Alcohol duty rise
Road tax for electric cars
State pension rise
2% public sector pay rise
15% energy consumption reduction by 2030
The government will halve the tax-free dividend allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024. Additionally, the dividend tax rate has risen by 1.25 percentage points. The rise in corporation tax, which was announced in October, together with the new rise in dividend tax, means a limited company with a £50,000 yearly turnover will pay £5,000 more tax.
The tax-free allowance for Capital Gains Tax has been halved from £12,300 to £6,150. This will take effect from April 2024.
The Chancellor has announced that the freeze to income tax has been extended for a further two years until April 2028.
This means that as wages increase in line with inflation, more people will find themselves on the higher-rate income tax bracket, while others will start paying tax for the first time. Currently, the tax threshold for the basic rate is £12,570, the higher rate is £50,270, and the additional rate is £125,000.
The threshold at which earners begin paying the 45p tax rate has been lowered from £150,000 to £125,140. This will cost those who earn £150k an additional £1,250 extra per year.
Mr Hunt announced that alcohol duties have risen. Although cigarette duties have remained the same, they are expected to rise in a Budget in the Spring.
Electric car owners will start paying road tax, it has been confirmed. Previously, drivers have been encouraged to swap their fuel-powered vehicles for electric ones, with no excise duty as an incentive. However, this would leave a £7 billion shortfall.
The 2019 Conservative manifesto promised to raise pensions by the triple lock: the highest of earnings (5.5%), inflation (10.1%), or 2.5%.
The state pension will rise by 10.1% in April 2023, Mr Hunt has announced, which means the state pension amount will increase from £185.15 to £203.85 a week. According to reports, ministers are considering scrapping the triple lock after 2025.
While public sector pay will be decided in 2023, the Chancellor announced that pay rises could be limited to 2% in 2023/24. The announcement comes amid strikes announced by nurses and 100,000 civil servants.
There were further measures announced in the statement that will impact businesses and households, including cuts to public spending, changes to HS2 investment and a delay to the cap on social care costs.
To view the statement in full, visit this page.
A new target to reduce energy consumption from buildings and industry by 15% by 2030 has been set. The Chancellor said that by doubling annual investment in energy efficiency, it will enable us to meet our net zero targets.
With the Autumn Statement not offering much in terms of optimism for SMEs, and with inflation at a record high, we understand that many businesses are in need of additional funding at this time.
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