The Autumn Statement 2022 comes at a time of significant challenge for the UK, alongside the rest of the world, which has faced damaging economic shocks due to the pandemic, Brexit, and the illegal war in Ukraine.
The fourth Chancellor of the Exchequer for 2022, Jeremy Hunt, pledged to face the “£55 billion black hole” to stabilise the UK economy and reputation as it heads towards a recession. This plan is vital for restoring economic stability and credibility after the previous Chancellor’s budget sparked turmoil., however many households will likely feel the pinch.
Hunt’s plans to tackle the cost-of-living crisis, protect the vulnerable and rebuild the UK economy, stating that “to be British is to be compassionate.”
Underscoring the scale of the challenge, however, just a day earlier, the Office for National Statistics (ONS) announced that inflation had reached a 41-year high of 11.1%.
This followed warnings from the Bank of England’s Monetary Policy Committee, as it increased interest rates to three per cent in early November, that the UK faces a “prolonged” recession.
So what was announced in the Autumn Statement 2022?
Public finances
Addressing the Office for Budget Responsibility’s (OBR) economic forecasts, the Chancellor said that the economy is now in recession and is expected to shrink by 1.4% in 2023/24 before growing in 2024/25.
Meanwhile, he said unemployment is expected to rise to 4.9% in 2024, up from 3.6% now, before falling to 4.1% the following year.
Borrowing this year stands at 7.1% of GDP, according to the OBR. Debt as a percentage of GDP is expected to peak at 97.6 % in 2025/26 before falling to 97.3% in 2027/28.
Personal tax
Beginning with personal tax, the Chancellor said that the threshold for the additional 45p rate of Income Tax will fall from £150,000 to £125,140 from April 2023.
At the same time, National Insurance, Inheritance Tax and Income Tax thresholds and Allowances will be frozen at their current levels for a further two years to 2028.
The Dividend Tax Allowance will fall from £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.
Turning to Capital Gains Tax, the Chancellor said the current Annual Exempt Amount will fall from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25.
He then turned his sights to electric vehicles, saying that a road tax will apply to them from 2025.
Finally, on personal tax measures, he said that the Stamp Duty Land Tax (SDLT) cuts announced by his predecessor, Kwasi Kwarteng, in September 2022 will end on 31 March 2025 and will not be permanent.
Business Tax
Turning to business taxes, the Chancellor said he would reduce the enhanced deduction rate for Research & Development (R&D) Tax Relief for SMEs from 130% to 86% of qualifying expenditures from April 2023. The tax credit for loss-making SMEs will fall from 14.5% to 10%.
On Business Rates, he said that the revaluation exercise will go ahead as planned in April 2023. £13.6 billion of support will be provided over five years to help businesses transition to the new bills.
Business Rates multipliers will be frozen in 2023/24 and there will be extended and increased relief for retail, hospitality and leisure businesses. That relief will increase to 75%.
The National Insurance Secondary Threshold will remain at £9,100 until April 2028.
Oil & Gas energy firms will pay an expanded windfall tax levy of 35%, up from the 25% levy currently. The Chancellor also introduced a 45% levy on Nuclear and Electricity producers, to raise £14bn.
National Living Wage, Energy and Pensions
Turning to the National Living Wage (NLW) and National Minimum Wage (NMW), the Chancellor announced he would increase the rates for those aged 23 and over by 9.7 per cent to £10.42 an hour from 1 April 2023.
Meanwhile, the rate of NMW for those aged 21 and 22, 18 to 20, and 16 and 17 will rise to £10.18, £7.49, and £5.28 an hour respectively. The apprentice rate will also rise to £5.28 an hour.
Moving to address energy costs, the Chancellor said the current Energy Price Guarantee (EPG) will remain in place until April 2023, limiting typical energy bills to £2,500 per year.
From April 2023, the EPG will rise to £3,000 for the typical household.
Concluding his speech with pensions, the Chancellor said that the State Pension Triple Lock will remain in place, meaning the State Pension will rise in April 2023 in line with September 2022’s rate of CPI – 10.1%.
For businesses and business owners, the impact of the changes is likely to vary considerably and a renewed focus on tax planning is likely to be needed. If you require assistance with any of these measures, please contact us.
Link: Autumn Statement 2022
