November 17, 2022
by  Josh Sab

Autumn Statement, A Summary - How does Jeremy Hunt's plan affect your business?

Today the Chancellor made an hour-long speech in the House of Commons explaining his plan moving forward and how he expected the country to close a £60 billion whole in the economy. The strategy was met with disapproval from the opposing party however initial market reactions are minimal, implying Hunt's words did some work toward alleviating the lack of confidence.

 

Tax and Pay:

  • The income tax threshold for high earners at 45% will be lowered from £150,000 to £125,140.
  • Income Tax, Personal Allowance and the higher rate thresholds are being frozen for an extra 2 years on top of the current freeze now ending in April 2028.
  • National Insurance and Inheritance tax are also having their current freeze extended till April 2028
  • National Living Wage is being increased from £9.50ph to £10.42 from April 2023
  • The tax-free allowance for dividends will be getting cut from £2,000 to £1,000 in 2023 and then again down to £5-- from April 2024
  • Similarly, for Capital gains, the tax-free allowance will drop from 12,300 to £6,000 in 2023/24 and again to £3,000 in 2024/25
  • Company Car tax rates for electric vehicles will be raised by 1% per year for 3 years commencing 2025

Energy:

  • The windfall tax on the profits of oil and gas firms will increase from 25% to 35%, extending until March 2028.
  • A 45% tax on electricity-generating companies will be applied from January though it is stated to be temporary

Economy and public finances:

  • The Office for Budget Responsibility (OBR) has declared the UK to be in recession, defined as the economy has slowed for two quarters in a row
  • OBR predicts a trend towards growth for this year overall of 4.2%, but size of the economy will shrink by 1.4% in 2023
  • UK's inflation rate is predicted to be 9.1% this year and 7.4% the year after
  • The government has redefined their roadmap to balance the books and reach its debt and spending targets to 5 years rather than the current 3 years

Other measures:

  • Pensions will also rise in line with inflation
  • Rent rises will be capped at 7% in the next financial year
  • The lifetime cap on social care costs in England is due in October 2023 delayed by two years
  • Sizewell C nuclear plant to begin the approval process for construction
  • Northern Powerhouse rail and HS2 are planned to go ahead

Government spending:

  • Defence spending will be maintained at the NATO minimum of 2%
  • Overseas aid spending is to be kept at 0.5% for the next five years, below the official target of 0.7%
  • The NHS budget will increase in each of the next two years for a total extra of £3.3bn
  • Schools will get an extra £2.3bn next year and the year after

The Chancellor said ‘stability, growth and public services are the government’s key areas of focus. With the context of a global rise in the cost of living after the pandemic and the energy crisis caused by the war waged by Russia, Hunt made it clear that the guiding principle in this plan was to try and be “fair in [its] solutions”.

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