Tax rises and spending cuts were the order of the day as Jeremy Hunt revealed his Autumn Statement in the House of Commons, aiming to settle the markets and provide some much-needed stability following Kwasi Kwarteng’s ill-fated mini-Budget.
Acknowledging the cost of living crisis and ongoing financial uncertainty, Hunt said his measures provide “fair solutions”, albeit through having to take “difficult decisions” in light of the economic climate.
But amid all the politicking and bluster, what does this Autumn Statement actually mean for consumers and businesses across the UK?
Tax rises
Hunt certainly didn’t shy away from the issue of raising taxes – despite it typically being anathema to those on his side of the chamber. In fact, he acknowledged that around half of the money raised from his budget measures would come from increased taxation, the other half from spending cuts.
One of the biggest increases in taxation revenue will come from Windfall Taxes, such as those on energy companies reporting enormous short-term profits. As such, the Energy Profits Levy will increase from 25% to 35% from January 2023 to March 2028.
For smaller companies, Hunt announced he would proceed with the revaluation of business properties from April 2023, saying it was “an important principle that bills should accurately reflect market values”.
Whilst this could mean rate increases, Hunt promised to soften the blow with a tax cut of nearly £14 billion – largely through the government-funded Transitional Relief scheme, as requested by the CBI. These measures will most benefit small shops, plus pubs, bars and restaurants. In fact, Hunt said that “nearly two thirds” would not pay a penny more next year.
Personal tax
On the subject of personal tax, Hunt announced that the threshold for the 45p additional rate of tax would be cut from £150,000 to £125,140. In real terms, it means those on a salary of £150,000 will pay just over £1,200 more in tax each year.
Similarly “difficult decisions” were taken on tax-free allowances, where Hunt pledged to maintain the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds at their current levels for an additional two years.
On unearned income, Hunt announced a cut in the dividend allowance – first from £2,000 to £1,000 in 2023, then a further cut to £500 in April 2024.
There will be similar rates of cuts to the Annual Exempt Amount for capital gains tax, falling from £12,300 to £6,000 next year, and then to £3,000 from April 2024.
Despite these seemingly large drops, Hunt maintained that the UK’s overall allowances would still be more generous than those on offer in Germany, Ireland, France, and Canada.
Road tax
The days of electric vehicles being exempt from road tax look numbered – a decision Hunt says he took following the OBR forecast that half of the vehicles on UK roads would be electric by 2025. The exemption from Vehicle Excise Duty will end in April of that year, although company car tax rates will remain lower for electric vehicles and rate increases will be kept to no more than one percentage point a year for three years from 2025.
Energy Price Guarantee
Whilst distancing himself from the so-called ‘Trussonomic’ era, Hunt pledged to continue the Energy Price Guarantee for 12 months from April, albeit at a higher level of £3000 per year for the average household.
Though a less generous offer than that of his predecessor, Hunt said his measures would still mean an average £500 of support.
To businesses, Hunt said: “Before the end of this year, we will also bring forward a new targeted approach to support businesses [with energy bills] from next April.”
Even in conclusion, Hunt admitted his plan was a “balanced” one, needing to make difficult decisions to support growth and public services. It’s yet to be seen how his decisions will play out in the long term, but the immediate settling of the markets following his announcement suggest at less turbulent waters ahead – at least for the foreseeable future.