‘Stability, growth and public services’ - keynotes of the Autumn Statement

Today, the new Chancellor of the Exchequer, Jeremy Hunt, delivered his much-anticipated Autumn Statement. He set out Rishi Sunak’s Government’s plans aimed at restoring stability and credibility to the UK’s finances which had taken such a knock under the previous, short-lived administration of Liz Truss.

Mr Hunt explained that the Statement contained measures which reflected the impact of high energy prices, the cost of living and inflationary pressures being felt world-wide following its emergence from the pandemic and the war in Ukraine. In what was predicted to be a Statement containing ‘eye-watering’ tax rises and spending cuts here are the headline announcements around tax and spending which will affect many:

• The threshold at which the personal income tax rate of 45% comes into effect has been reduced from £150,000 to £125,140 from April 2023;
• The Personal Tax Allowance, Inheritance Tax and NICs thresholds remain frozen until 2028, from 2026;
• The existing Dividends Allowance of £2,000 is to be reduced to £1,000 in April 2023 and further reduced to £500 in April 2024;
• The Capital Gains Tax Annual Exemption for individuals is to fall from the current £12,300 to £6,000 in April 2023 and is to be further reduced to £3,000 in April 2024;
• R & D tax relief and tax credits are to be scaled back;
• The Energy Price Guarantee will rise to £3,000 from April 2023;
• The Business Rates Review (a re-rating exercise) is to continue but there will be additional support for small businesses;
• Windfall Tax on the profits of oil and gas companies is to be increased. There will also be an increase in the windfall profits tax on older renewable and nuclear energy generators;
• The triple lock on pensions is to be maintained whilst benefits will generally increase by the rate of inflation of 10.1% from April 2023;
• The National Minimum Wage will increase from £9.50 to £10.42 per hour for over 23 year olds.
• Electric cars, vans and motorbikes will pay vehicle duty.

The Chancellor announced a series of other measures to improve the nation’s energy independence and efficiency, reaffirmed the Government’s intention to press on with improved infrastructure plans and its initiative to drive innovation and entrepreneurship. With an expected shortfall of around £55 billion to be addressed, the Chancellor shared the pain equally between tax rises and spending cuts. It remains to be seen whether these fiscal plans are sufficient to make the expected recession shallower and shorter than predicted.