The Chancellor Jeremy Hunt has delivered his Autumn Statement, announcing a series of tax rises and spending cuts aimed at tackling the cost-of-living crisis and rebuilding the economy.

Here, we give our summary of the key tax measures and share our reaction…

Income tax

The threshold at which higher earners start to pay the 45p rate of Income Tax will be reduced from £150,000 to £125,140 from 6 April 2023. Other Income Tax thresholds are being frozen until April 2028.

National Insurance

The threshold for employer National Insurance contributions (NICs) will be fixed until April 2028.

Inheritance tax

IHT threshold remains unchanged until April 2028.

Dividends

The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.

Capital gains tax

The annual exempt amount for CGT will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.

Motoring tax

Electric cars, vans and motorcycles will no longer be exempt from Vehicle Excise Duty from April 2025. But company car tax rates will remain lower for electric vehicles.

Windfall tax

From 1 January 2023 the Energy Profits Levy on oil and gas companies will increase from 25% to 35%, with the levy remaining in place until the end of March 2028. And a new, temporary 45% levy will be introduced for electricity generators.

VAT

The VAT registration threshold will stay at £85,000 for two years from April 2024.

Online sales tax

The Government has decided not to introduce an online sales tax (OST). It said the decision reflected concerns raised about an OST’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models.

R&D tax relief

The Research and Development (R&D) tax relief deduction rate for the SME scheme will be cut to 86% and the credit rate reduced to 10%. But the rate of the separate R&D expenditure credit will go up from 13% to 20%.

What else is in the Autumn Statement?

  • The Government will put into action the OECD Pillar 2 rules to deliver a global minimum corporate tax rate of 15%. It said this would protect the UK tax base against aggressive tax planning and reinforce the competitiveness of the UK.
  • From April 2023 the National Living Wage will rise by 9.7% and the National Minimum Wage will also increase.
  • Households on means-tested benefits will get an additional £900 cost-of-living payment in 2023-24. Pensioner households will get an extra £300 payment, and people on disability benefits will receive an additional £150 payment in 2023-24.
  • The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. And from April 2023 the EPG will rise to £3,000.
  • The state pension and benefits will rise in line with inflation from April 2023.
  • Local authorities in England will get extra flexibility in setting council tax as the referendum limit for increases in council tax will rise to 3% per year from April 2023. Plus, local authorities with social care responsibilities will be able to increase the adult social care precept by up to 2% per year.

(Note: some of the measures in this article are different for Scotland, Wales or Northern Ireland.)

Delivering his Autumn Statement, 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. We do so today with British resilience and British compassion. Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.”

OBR forecast

Meanwhile, the Office for Budget Responsibility (OBR) has confirmed the UK is now in a recession.

Releasing its Economic and fiscal outlook, the OBR said: “Over £100 billion of additional fiscal support over the next two years cushions the blow of higher energy prices – but the economy still falls into recession and living standards fall 7 per cent over two years, wiping out eight years’ growth.

“Over the medium term, around £40 billion in tax rises and spending cuts – in roughly equal measure – offsets higher debt interest and welfare costs and gets debt falling as a share of GDP. But at 99 per cent of GDP at the forecast horizon, debt is roughly £400 billion higher than forecast in March and interest costs close to historic highs.”

Our reaction to the Autumn Statement

Given the unprecedented events of the last few years and the associated level of national debt, it was inevitable tax rises would follow. This is obviously the first attempt at levelling out the finances.

Whether or not there will be further increases to follow will remain to be seen, but let’s hope there is a period of stability now in the tax system.

As we are now in recession and with the worst cost of living crisis for many years, it’s important everyone is able to plan forward and know what disposable income they have, which can’t happen when the tax rules change every few weeks.

UK tax advice

If you need help understanding your taxes or would like the support of a professional tax adviser, chat to our team today. We’re experienced at helping people and businesses in the West Midlands and across the UK to manage their tax payments.

Call us on 07813 434195 or email: stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation