The Chancellor of the Exchequer has released his Autumn Statement today. In stark contrast to his predecessor’s September ‘mini-budget’ Jeremy Hunt used this speech to announce tax rises and a squeeze on public spending in order to curb the ever growing inflation problem.
With the Office of Budget Responsibility’s long awaited fiscal forecast offering a less than optimistic view of the coming months, Mr Hunt confirmed the anticipated freeze of the personal allowance thresholds until April 2028. These so-called ‘stealth tax rises’ will apply to VAT, income tax, pension savings, capital gains tax and inheritance tax.
The Chancellor stated that he had approached the situation with “fairness and compassion” in the administration of the rise in these taxes in order that the poorest people in the country wouldn’t be the ones to bear the burden, adding that “those with the broadest shoulders” would, instead, be the ones who are taxed the most.
“There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. We do so today with British resilience and British compassion.”
The Chancellor then announced that the threshold of the 45% rate would be lowered from £150,000 to £125,000 and rolled out a number of other tax increasing measures (halving the £12,300 tax-free allowance for capital gains to £6,150 being a prime example).
Various other measures were announced by Mr Hunt in response to the pessimistic forecasts published alongside the Autumn Statement. These are:
Windfall tax will increase from 25% to 35%
Personal allowance thresholds frozen until April 2028
Capital gains tax allowance cut by more than half (from £12,300 to £6,000)
A freeze on inheritance tax nil rate bands until 2027- 28
A revised, more targeted energy costsupport package from April 2023
Dividend allowance cut to £1,000
Electric cars will no longer be exempt from vehicle excise duty
Employer’s NI threshold frozen until April 2028
VAT threshold will be maintained until March 2026
R&D relief for SMEs cut to 86% and the credit rate to 10% ( a measure to combat fraud)
SDLT cut will now only remain until March 2025
An increase in the national living wage for over 23 year olds to £10.42 per hour
The tax rises are expected to raise £24bn, to combine around £30bn of spending cuts also announced.
Business Tax Measures
While the media has mainly focused on the ‘stealth taxes’ so far, another significant rise in tax is the expansion of the windfall tax from 25% to 35% until 2028. Rishi Sunak brought in the 25% energy profit levy in May when he was Chancellor but the new levy will go further and introduce a temporary 45% tax on electricity generators from January 2022.
Mr Hunt then addressed R&D tax credits and followed Rishi Sunak’s lead from the Spring Statement by announcing a cut in the production rate for the SME scheme to 86% and the tax credit rate to 10%, stating that “the OBR have confirmed that these measures have no detrimental impact on the level of R&D investment in the economy,” before adding that the government would be protecting £20bn in R&D investment in 2024-25.
The Chancellor then announced that he had decided to freeze the employers NI threshold until April 2028. “We will retain the employment allowance at a new higher level of £5,000. This means 40% of all businesses will it no NICs at all,” he said.
Noting that “the VAT threshold is already more than twice as high as the EU or OECD averages”, Mr Hunt also stated that the threshold will be maintained at its current level until 2026.
He then said that a government-backed crackdown on avoidance and evasion will raise an additional £2.8bn by 2027-28. In order, perhaps, to administer this, the government will allocate an additional £79m over the next five years for HMRC to tackle additional cases of serious tax fraud and find a solution to the various tax compliance risks among wealthy taxpayers. The Treasury expects this to bring in £725m by 2028.
Living Wage Increase
In good news for lower paid employees, Jeremy Hunt announced that there will be an increase to the national living wage from £9.50 to £10.42 per hour for those over 23 from April 2023. This garnered applause and cheers from the back benches, who didn’t have much to cheer about otherwise given the 41 year high inflation levels. The Chancellor did, however give a little positivity including retaining the triple lock on pensions and raising benefits in line with September’s 10.1% inflation.
With regards to the energy crisis, Hunt explained that once the universal package of support ends in April 2023, there will be a new scheme for the vulnerable and households.
Unlike Kwasi Kwarteng’s much criticised fiscal announcement in September, Mr Hunt’s statement was accompanied by OBR’s forecast. The Chancellor was sure to reference the findings of the OBR where possible, perhaps giving consideration to the impact of its absence in September, but the report was not a pleasant one.
The Chancellor made sure to frame the tough tax-hikes as a response to global financial matters such as the Ukraine War, the fallout from the pandemic and high rates of inflation worldwide, stating:
“The Office of Budget Responsibility confirms global factors are the primary cause of how countries are still dealing with the fallout from a once in a century pandemic.”
“Lower interest rates generated by the government actions are benefitting our economy.”
The OBR report confirmed that the UK is now in recession and outlined the stark impact of global headwinds. Mr Hunt ensured the house that the government’s actions today will aid in bringing inflation under control from next year. “The OBR confirmed that because of our plans recession is shallower and inflation is reduced”.
Unlocking Financial Success with K2 Accountancy Group, Your Trusted Ilkeston Accountant
Welcome to K2 Accountancy Group, your reliable Ilkeston Accountant and partner for comprehensive and customised accounting services. As an Ilkeston-based, family-owned and operated business, we take pride in not only delivering top-notch financial solutions but also in giving back to the community through various fundraising initiatives and events.Breaking Down the Autumn Statement 2023: A Fiscal Pivot Towards Growth and Tax Cuts
The Autumn Statement in Brief
Today, The Chancellor of the Exchequer has delivered his autumn statement in the House of Commons after noting that the “plan for the British economy is working, but the work is not done”. Unlocking Success: Your Trusted Nottingham Accountants with Expert Back Office Services
Why Choose K2 as your Nottingham Accountants? At K2 Accountancy Group, we stand out as the premier Nottingham accountants, offering a unique blend of traditional financial services and specialised expertise in back office management. Our commitment to excellence sets us apart, making us the go-to choice for businesses in construction, hospitality, manufacturing, logistics, and beyond.HMRC's "Process Now, Check Later" Approach Leaves Taxpayers Vulnerable to Abuse