It was a bright and early start for our new chancellor, Jeremy Hunt, as he promptly kicked off his Autumn Statement speech to the Commons at 11:30am.
His hour-long statement covered plenty of ground, and as the old adage goes – the devil is in the detail – and this can be found here.
The Chancellor cited the OBR’s confirmation that global factors are the primary cause of current inflation, going on to detail:
• Costs of the pandemic
• Impact on supply chains
• Russia’s invasion of Ukraine, which resulted in wholesale gas and electricity prices rising to eight times their historic average
The UK is also currently in recession, explained the Chancellor, as he cited the OBR’s views and independent figures. Its forecasted inflation rate is 9.1% this year and 7.4% next year. Despite this, the economy is still forecasting growth of 4.2%.
Acknowledging these turbulent times, the Chancellor explained how the Government’s priorities are growth, public services and establishing stability.
Whilst Mr Hunt made short work of his tax announcements, most of which had been speculated on by the media, the main changes announced are:
• The additional rate income tax threshold at which the 45p rate becomes payable will decrease from £150,000 to £125,140 with effect from 6 April 2023. Those earning £150,000 or more will pay just over £1,200 more in tax every year.
• Tax-free allowances are being maintained at current levels. These include the income tax personal allowance, higher rate threshold, main national insurance thresholds and inheritance tax thresholds. They will remain static for a further two years to April 2028.
• Allowances on unearned income are to be reduced. The dividend allowance will be cut from £2,000 to £1,000 from April 2023, and then to £500 from April 2024.
• The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 from April 2023 and then to £3,000 from April 2024.
• From April 2025, electric vehicles will no longer be exempt from Vehicle Excise Duty.
• Company car tax rates will remain lower for electric vehicles and rate increases will be limited to 1ppt a year for three years from 2025.
• The employers NICs threshold will remain unchanged until April 2028 and the employment allowance will stay at its new, higher level of £5,000.
• The VAT registration threshold will remain at its present level until March 2026.
• The R&D deduction rate for the SME scheme is to be reduced from 130% to 86% and the credit rate from 14.5% to 10%, but the rate of the separate R&D expenditure credit will increase from 13% to 20%.
• The revaluation of business properties from April 2023 will proceed so that business rate bills can accurately reflect market values. The aim is that many pubs, restaurants and small high street shops will benefit from this reform.
In briefest terms, he announced that:
• Defence and international commitments: The PM and the Chancellor recognise the need to increase defence spending, but for now, they will maintain the defence budget at least 2% of GDP to be consistent with our NATO commitment.
• Commitment to overseas aid will remain around 0.5% for the forecast period.
• Education will see a further investment of an extra £2.3bn per year in state schools.
• The social care system will benefit from additional grant funding of £1bn next year and £1.7bn the year after for adult social care, and an increase in funding available for the social care sector of up to £2.8bn next year and £4.7bn the year after.
• NHS England’s budget will increase in each of the next two years by an extra £3.3bn and the Chancellor committed an extra £1.5bn for the Scottish Government; £1.2bn for the Welsh Government; and £650m for the Northern Ireland Executive.
• Energy: In the face of Putin’s weaponisation of international gas prices, the Chancellor wants the UK to have energy independence, announcing the Government will proceed with its investment into Sizewell C.
• The Government is sticking with its plan to help households and businesses with their energy bills. From April, the Energy Price Guarantee will continue for a further 12 months at a higher level of £3000 per year for the average household.
As always, should you wish to discuss the above in further detail, contact your local Champion office.