After just 34 days in office, Jeremy Hunt delivered his Autumn statement to the House of Commons on November 17th.
With £55 billion worth of public debt looming behind the curtain, tax hikes and spending cuts were expected if the Government were to lower the debt facing the country.
Here are the main talking points.
Opening his Autumn Statement with an overview of the economy as reported by the Office for Budget and Responsibilty (OBR), Hunt first addressed the economic outlook.
It grew by 4.2% throughout 2022, but is now in recession until well into 2023.
This represents a contraction of 1.4% by next year, the OBR said.
“Without the energy price guarantee and other measures, the recession would be 1.1 percentage points deeper”, it added.
After that, GDP will increase by 1.3%, 2.6%, and 2.7% in the ensuing years, bringing the economy fully back to its pre-pandemic level in the fourth quarter of 2024 while inflation declines to reach the government’s objective of 2% in 2027.
But in the two fiscal years leading up to 2023/24, strong inflation will cut earnings and living standards by 7%, erasing the previous eight years of gain.
Hunt made many announcements regarding personal taxes before diving into the details of the Autumn Statement.
These included a declaration that the threshold for the additional rate of tax for higher earners would be reduced from £150,000 to £125,140 starting in April 2023, putting 250,000 more people in the bracket.
The annual exempt allowance, often known as the capital gains tax allowance, will be reduced from £12,300 to £6,000 for the 2023–2024 tax year and subsequently cut in half to £3,000 for the 2024–2025 tax year.
The tax-free dividend amount will also be reduced in April 2023 from £2,000 to £1,000 per year. In April 2024, it will once again be reduced to £500.
Hunt also announced a number of tax threshold freezes to boost revenues. These comprised:
- Income tax: The personal allowance will stay at £12,570 for a further two years till 2028. When Rishi Sunak was the Chancellor, he put the freeze into effect until 2026.
- National Insurance: From now until 2028, the threshold at which people must pay National Insurance contributions will stay at £12,570.
- The inheritance tax threshold has been locked at £325,000 since April 2009 and is likewise suspended until 2028.
A number of payments to assist households with their energy expenses, as well as the fact that electric vehicles won’t be free from the vehicle excise charge, starting in 2025, were also announced.
Hunt announced a number of modifications in addition to the April 2023 business rates reassessment, including:
- Multipliers will be frozen in 2023/24 at 49.9p and 51.2p, rather than increasing to 52.9p and 54.2p.
- Relief for retail, hospitality and leisure will increase from 50% to 75%. That equates to £110,000 per business in 2023/24.
- A transactional relief scheme will place ‘upward caps’ on bill increases caused by changes to rateable values at the 2023 revaluation.
- A ‘supporting small business scheme’ will cap bill increases at £600 per year for certain small businesses.
The additional deduction for SME R&D relief will be reduced from 130% to 86%, and the SME credit rate will be lowered from 14.5% to 10%, according to the Chancellor.
Hunt explained the rise in the R&D spending credit from 13% to 20% as a “rebalancing” of the two reliefs and a step to combat false claims in the SME scheme.
Talk to us about your business and how the Autumn Statement will affect you.