No more than 34 days after taking office, Jeremy Hunt gave his first budget statement to the House of Commons on 17 November.
Tax hikes and spending cuts were expected if the Government wanted to reduce £55 billion worth of national debt within five years.
In this article, we’ll look over the key points.
Economic outlook
Hunt started his Autumn Statement with an overview of the economy, as provided by the Office for Budget Responsibility (OBR).
Although the economy will have grown by 4.2% by the end of 2022, it is now in a recession that will extend until 2023, when the OBR estimates it will decline by 1.4%.
“Without the energy price guarantee and other measures, the recession would be 1.1 percentage points deeper” they confirmed.
The economy will fully recover to its pre-pandemic level in the fourth quarter of 2024 as GDP grows by 1.3%, 2.6%, and 2.7% during the next few years, with inflation falling to the Government’s objective of 2% in 2027.
However, strong inflation and a sharp decline in wages and living standards will reverse eight years worth of gains in the two years to 2023/24.
Personal taxation changes
Hunt then made a number of announcements relating to personal taxation.
These included lowering the threshold for the extra rate of tax from £150,000 to £125,140, putting 250,000 more persons under the tax bracket from April 2023 onwards.
The annual exempt allowance, often known as the capital gains tax allowance, will decrease from its present level of £12,300 to £6,000 in the 2023/24 tax year and then halve to £3,000 in 2024/25.
Likewise, the tax-free dividend amount will decrease from £2,000 to £1,000 in April 2023. It will be lowered once more to £500 in April 2024.
Hunt also announced a slew of tax threshold freezes to increase tax revenue, including:
- Income tax – the personal allowance will remain at £12,570 for a further two years until 2028.
- National Insurance – the threshold for paying National Insurance Contributions will remain at £12,570 for a further two years until 2028.
- Inheritance tax – the £325,000 threshold, which has been in place since 2009, is also frozen until 2028.
Other announcements made public included electric vehicles no longer being exempt from vehicle excise duty tax from 2025 onwards, as well as a number of payments to assist families with energy bills.
Business changes
Hunt announced a variety of reforms to assist businesses with the business rates revaluation taking place in April 2023, 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 go from 14.5% to 10%.
According to Hunt, the increase in the R&D spending credit from 13% to 20% was made in order to “rebalance” the two reliefs and stop fraudulent claims under the SME programme.
Talk to us about your business and how the Autumn Statement will affect you.