Chancellor Jeremy Hunt has presented the Autumn Statement with plans to tackle three priorities – “stability, growth and public services.”
With a selection of tax cuts and belt-tightening measures, the Chancellor is looking to stabilise the economy. Read on to find out what changes in tax and spending were covered in the speech.
The economy and fiscal forecasts
- The UK is officially in a recession and GDP is expected to fall by 1.4% in 2023, before rising to 1.3% the following year.
- The Office for Budget Responsibility has said that ”global factors” are the primary cause of current inflation and that inflation will be 9.1% this year and drop to 7.4% next year.
- Borrowings are predicted to be 7.1% of GDP, before dropping to 5.5% of GDP in 2024 and then 2.4% of GDP.
- Unemployment is expected to rise from 3.6% now to 4.9% in 2024 and then drop to 4.1% in 2025.
Taxes and duties
- The threshold at which the highest earners start paying the additional rate of tax (45%) will be lowered from £150,000 to £125,140
- The dividend tax threshold will drop from £2,000 to £1,000 in 2023, and then to £500 in 2024.
- Capital Gains Tax thresholds will drop from £12,300 to £6,000 in 2023 and then to £3,000 in 2024.
- The income tax and National Insurance threshold of £12,570, and inheritance tax threshold of £325,000, will remain until 2027/28.
- The Employers’ NI contributions threshold is also frozen until April 2028. However, the Employer Allowance will stay at £5,000, meaning no NI is payable until this amount has been reached.
- The Stamp Duty cuts will remain in place until March 2025, which consisted of the nil-rate band being doubled to £250,000 and the first-time buyer threshold increasing to £425,000. It also includes the value of a property on which first-time buyers can claim relief being increased to £625,000.
- The threshold where VAT registration is compulsory will also remain at £85,000.
- Electric cars will no longer be exempt from Vehicle Excise Duty from 2025. Also, the benefit in kind for a pure EV is currently 2% and remains at this rate up to April 2025. Thereafter, it will increase to 3% in 2025/26, to 4% in 2026/27, and 5% in 2027/28.
- R&D tax relief to be reduced for SMEs by cutting the deduction rate for the SME scheme to 86% and the credit rate to 10%, but the rate of the separate R&D expenditure credit will increase from 13% to 20%.
- There will be a temporary increase in the Windfall Tax on oil and gas companies from 25% to 35% and also a 45% Windfall Tax on electricity generators from 1 January 2023.
- Business rates – the revaluation of properties will go ahead in April 2023, but there will also be a government-funded relief scheme to help the retail, hospitality and leisure industries and also relief for small businesses who might fall outside of the small business rate relief after the revaluation.
Cost of living support
- The government’s energy price guarantee will be kept at an average of £3,000 for a typical household for a further 12 months, up from £2,500 at present.
- There will be a new once-off payment of £900 to households on means-tested benefits, £300 to pensioner households, and £150 for individuals on disability benefit.
- The “national living wage” will rise next year to £10.42 an hour.
- Benefits will rise in line with September’s inflation rate by 10.1%.
- The benefit cap will be increased with inflation next year.
- The pensions triple lock will be kept.
Public sector and government spending
- Public spending will grow at a slower rate than the economy over the next three years.
- Defense spending to stay at 2% of GDP.
- Overseas aid to remain at 0.5% of GDP.
- Commitment to reduce carbon emissions by 68% by 2030.
- Education to receive £2.3 billion per annum over the next two years.
- NHS will receive an addition £3.3 billion.
- The Nuclear Power plant at Sizewell C will proceed.
- There will be no cuts in UK capital budgets for the next two years.
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