Chancellor Jeremy Hunt announced today that the threshold has reduced at which the 45p rate becomes payable from £125,140 as opposed to the current £150,000. Hunt said the change will mean higher earners will pay around £1,200 a year more in tax and it is expected to pull an extra 250,000 people into the top bracket.
Income Tax and Inheritance Tax frozen till April 2028
The Chancellor also announced a range of tax threshold freezes. Income tax and inheritance tax will be frozen for a further two years, on top of an existing four-year freeze. He said: “I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028.”
Pensions ‘Triple Lock’ to continue
Chancellor Jeremy Hunt confirmed that the pensions triple lock is to be protected. In today’s Autumn Statement, the government said that the state pension and pension credit will rise in line with inflation in April 2023, an increase of 10.1%. The triple lock promises an increase in the state pension by whichever is highest – earnings growth, consumer price inflation growth, or 2.5% a year. On pensions, he added: “The cost of living crisis is harming all pensioners so because we have taken difficult decisions elsewhere in this statement, I can today announce that we will fulfil our pledge to the country to protect the pensions triple lock. “So, in April, the state pension will increase in line with inflation, an £870 increase which represents the biggest ever cash increase in the state pension.
Capital Gains Tax threshold halved
The annual exempt amount for capital gains tax has been halved from £12,000 to £6,000 next year and then to £3,000 from April 2024. The tax-free dividend allowance will be reduced to £1,000 in 2023-24.
Business Rates Support of almost £14bn
Chancellor Jeremy Hunt has promised the government will provide a package of almost £14bn in business rates support in the coming years. The Chancellor laid out his long-awaited economy plan and pledged £13.6bn in tax cuts for companies over a period of five years and said a revaluation of rates would go ahead from April 2023. He said bills paid by businesses “should accurately reflect their market value”, promising two-thirds of properties “won’t pay a penny next year”.
Two new ‘Fiscal Rules’
Hunt confirmed two new fiscal rules: the first is that underlying debt must fall as a percentage of GDP within five years. The second is that public sector borrowing, over the same period, must be below 3% of GDP.
Stamp Duty cuts to stay in place till March 2025
The stamp duty cuts that were introduced in Kwasi Kwarteng’s mini-Budget will remain in place until March 2025. The changes, introduced on September 23rd, were announced as a permanent measure, but Jeremy Hunt said in today’s Autumn Budget that the property tax break would be a ‘long holiday instead.’
Huge hike in Windfall Tax
The Chancellor announced a large hike in the taxes slapped down on the profits of energy giants, which will go from 25% to 35% from 1st January until March 2028, as the Treasury scrambles to shore up funds to plug the £55billion fiscal black hole Government finances. Mr Hunt said that the windfall tax should not deter investment, which was one of the main reasons the previous cabinet had been reluctant to increase the Energy Profits levy.
There will be reformed allowances on unearned income. The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.
Electric Car owners to start paying tax
It was also announced that from April 2025, all emission-free vehicles will have to pay Vehicle Excise Duty (VED), otherwise known as road tax. He said: “To make our motoring tax system fairer I’ve decided that electric vehicles will no longer be exempt from Vehicle Excise Duty.”
National Insurance Contributions thresholds freeze to continue
Jeremy Hunt also announced that the government had decided to maintain the current freeze on employers’ national insurance (NI) contribution thresholds for a further two years. While the Employers National Insurance Contributions threshold is frozen until April 2028, the Employment Allowance will be retained at its new, higher level of £5,000 until March 2026.
£2.3bn extra funding for Schools
Schools will get an extra £2.3 billion in funding in each of the next two years, Chancellor Jeremy Hunt said today. The cash increase will apply for both 2023-24 and 2024-25. Treasury documents published after the announcement show that core schools funding will rise from £53.8 billion this year, to £58.8 billion by 2025, a 9% rise. It will also provide an “average cash increase for every pupil of more than £1,000 by 2024-25, compared to 2021-22”, the Treasury documents state.
Huge £3.3bn hike in NHS & Social Care Spending
Over the next 2 years, the NHS budget will increase by an extra £3.3bn. He also announced an increase in funding for the social care sector of up to £2.8bn next year and £4.7bn the following year.
Energy Price Guarantee continued for a further 12 months
From April, the government will continue the Energy Price Guarantee for a further 12 months at a higher level of £3,000 per year for the average household. A typical household will see prices for gas and electricity go up from £2,500 a year now to over £3,000, instead of £4,000, with the scheme running for 12 months from next April. The cap on how much energy companies can charge per unit was originally to be in place for two years. Mr Hunt also announced an extra £900 support for people on benefits, an extra £300 for pensioners and an extra £150 for people on disability benefits towards bills.
National Living Wage to increase to £10.42 an hour
The National Living Wage will rise from £9.50 to £10.42 an hour in his budget speech in the House of Commons. This is an increase of 92 pence an hour or 9.7 per cent. This represents an annual pay rise worth over £1,600 to a full-time worker, Hunt said. The National Living Wage goes up every April, but the new rates are announced months in advance, to allow firms to prepare.