Cutting to the Chase: Chancellor Jeremy Hunt's Autumn Statement

The Chancellor of the Exchequer Jeremy Hunt announced his Autumn Statement on the 17th November alongside the Office for Budget Responsibility (OBR) forecast. This followed his 'un-budget' early last month, reversing the majority of former Chancellor Kwasi Kwarteng's emergency 'mini-Budget'.

This morning (17th November 2022) the Chancellor Jeremy Hunt held the government's third economic statement in three months. Backed by the new Prime Minister Rishi Sunak, his plan largely focussed on taxation and minimal spending to help fill the £60b public finance deficit.

Although it was meant to be presented as the 'Medium Term Fiscal Statement', the pandemonium following Kwarteng and Truss' growth plan meant that the Chancellor's announcement was shifted to a full Autumn Statement based on the “most accurate possible economic forecasts and forecasts of public finances”.

Despite Mr. Hunt already overturning nearly all of his predecessor's sweeping cuts, he still had plenty of updates to delivery - mainly tax related as expected following his recent statement "we’re all going to be paying a bit more tax".

"We're going to have to make difficult decisions on spending - it won't go up by as much as people want... There are going to be difficult decisions on tax as well - some taxes won't come down as quickly as thought, some taxes will go up."

-Chancellor Jeremy Hunt

So, while we weren't surprised to hear increases to taxes and a hold on public spending (each rumoured to be 50% of the budget well in advance of the big day), it will probably be difficult to see the benefits of these measures among soaring energy prices, inflation, an unsteady market and the cost-of-living crisis.

What did Chancellor Jeremy Hunt announce in today's Autumn Statement?

The Chancellor's budget largely focused on taxation, allowances & reliefs, and pensions. But before we dive into the key announcements delivered in the Autumn statement, let's first review what he delivered last month.

In mid-October, Jeremy Hunt made a brief emergency budget announcement that impacted businesses and individuals across the UK, striking off and amending the vast majority of items from the previous budget including Income Tax, Corporation Tax and The Energy Price Guarantee.

• Income Tax - the basic rate of income tax to no longer be cut by 1%, it will remain at 20% indefinitely
• Corporation Tax - from 1 April 2023 Corporation Tax to increase from 19% to 25%
• The Energy Price Guarantee - while this scheme will remain in place over the winter months, it will now end in April 2023
• Dividend Tax - the 1.25% rate reduction in Dividend Tax to be reversed
• Health Care and Social Levy - the 1.25% Health and Social Care Levy reversal was confirmed and scheduled to begin 6 November 2022
• Stamp Duty Land Tax - the Stamp Duty Land Tax (SDLT) threshold increased; no SDLT to be paid on properties purchased under £250,000 (previously £125,000), or £425,000 (previously £300,000) for first-time home buyers
• Uncosted Tax Cuts - the IR35 reform repeal, freeze on alcohol duty rate and VAT-free scheme all cancelled
• Annual Investment Allowance - £1m Annual Investment Allowance to remain indefinitely

The Autumn Statement Key Announcements

Below we have set out a summary of the key announcements from the Autumn Statement.

Income Tax

There was much speculation regarding stealth taxes and reduced thresholds in the build up to the Chancellor's Autumn Statement. While the government sees this as a partial solution to help fill the 'fiscal black hole', these changes will see more people paying a considerable rise in income tax as inflation and pay increases push them into a higher tax band over the next several years.

Key highlights:

• The freeze on income tax thresholds extended to 2028 - this means the personal allowance will remain at £12,570 for a further two years beyond what was originally planned

• National insurance thresholds will also remain frozen for another three years from 2025

• From April 2023 the 45% tax rate threshold will be reduced to £125,140 from £150,000

• The national living wage for those over 23 is set to increase from £9.50 to £10.42 from April 2023

Dividend Tax

While Kwasi Kwarteng planned to reduce the dividend tax rate by 1.25%, this was withdrawn by Chancellor Jeremy Hunt in his brief October announcement. More revisions to dividend tax were announced in the Autumn Statement, including the rate of taxation and a cut to the tax-free allowance.

Key highlights:

• The planned 1.25% dividend tax rate decrease due to be introduced in April 2023 has been withdrawn

• Dividend allowance will be reduced by half from £2,000 to £1,000 for 2023/24, then from £1,000 to £500 for 2024/25

Capital Gains Tax

Prime Minister Rishi Sunak and the Chancellor made it clear that whilst everyone's taxes would increase, “those with the broadest shoulders should be asked to bear the greatest burden" - were they referring to those who are subject to Capital Gains Tax (CGT)?

Reforming Capital Gains Tax was suggested by the Office of Tax Simplification (OTS) in November 2020 - while Mr. Sunak didn't bring this advice on board as Chancellor at the time, the Autumn Statement did deliver some changes to CGT.

Key highlights:

• The CGT Annual Exemption will be reduced from £12,300 to £6,000 as of April 2023 and to £3,000 from April 2024

Employers' NI

Key highlights:

• The Employment Allowance will remain at £5,000

Inheritance Tax

Mr. Sunak introduced a freeze on the Inheritance Tax threshold in his 2021 Spring Budget and this will be extended for an additional three years.

Key highlights:

• The tax-free Inheritance Tax threshold will remain at £325,000 until 2028

VAT

In line with income tax, NI and inheritance tax the freeze on VAT will be in place for a further three years. This means more businesses will be required to register for VAT as turnover continues to increase with rising prices.

Key highlights:

• The VAT threshold will remain at £85,000 until 2026

Stamp Duty

In September 2022 the government increased the nil rate threshold of Stamp Duty Land Tax (SDLT) on property purchases from £125,000 to £250,000. For first-time buyers this moved from £300,000 to £425,000 (with the maximum purchase price for which relief can be claimed increasing from £500,000 to £625,000) - this will now be a temporary reduction.

Key highlights:

• The reduction will only remain in place until March 2025

Pensions and Benefits

With the Prime Minister emphasising that the government "will put fairness and compassion at the heart of all the decisions we make" before the fiscal statement, there was little surprise when the Autumn Statement committed to increase pensions and benefits in line with inflation.

Key highlights:

• The UK state pension 'triple lock' will remain and pensions, as well as benefits, will increase by 10.1%

Windfall Tax

Perhaps seen as the biggest winners in the cost-of-living crisis, energy companies have seen substantial profit increases succeeding the rise in oil and gas prices. While energy firms and electricity generators have been subject to an Energy Profits Levy since Mr. Sunak's time as Chancellor, the Autumn Statement delivered a revision to the timeframe and rate of taxation to help fund further household support.

Key highlights:

• The rate of the tax paid on profits made from extracting UK oil and gas will be increase by 10% - rising from 25% to 35%

• The levy was initial scheduled run until 2025, but this has been extended to March 2028

Where Kwarteng's budget emphasised ideals of economic growth, Hunt's focussed on stabilising public finances. Policy backtracking is not unheard of for the government - but the rate at which things have U-turned causing drastic consequences such as soaring interest rates is unexpected and impacting businesses and households significantly.

Like everyone across the country, the Bank of England has been trying to keep up with the changing landscape of parliament, as well as the state of the economy. On 3 November 2022, the BoE increased interest rates by 0.75% - the biggest rise since 1989.

While the Chancellor and Prime Minister are hoping the Autumn Statement will lessen the risks associated with recession and alleviate the cost-of-living squeeze on households, we'll have to wait and see if these government initiatives will be enough to abate the Bank of England's grim inflation forecast.

How can DSA Prospect help?

As always, more news on these announcements will continue to develop and this is a merely a guide to some of the main points initially discussed.

We recommend seeking further consultation on any questions you may have regarding this emergency mini-Budget and encourage you to get in touch with our team.

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