Autumn Statement 2022: taxes in brief
Today, 17th of November, the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, made his Autumn Statement 2022 speech.
He has revealed tax rises and spending cuts worth billions of pounds aimed at mending the nation's finances.
Taxation and wages
- Legally-enforceable minimum wage for people aged over 23 to increase from £9.50 to £10.42 an hour from next April
- State pension payments and means-tested and disability benefits to increase by 10.1%, in line with inflation
- Apart from in Scotland, top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000
- Income tax personal allowance and higher rate thresholds frozen for further two years, until April 2028
- Main National Insurance and inheritance tax thresholds also frozen for further two years, until April 2028
- Tax-free allowances for dividend and capital gains tax also due to be cut next year and in 2024
- Local councils in England will be able to hike council tax up to 5% a year without a local vote, instead of 3% currently
- Household energy price cap extended for one year beyond April but made less generous, with typical bills capped at £3,000 a year instead of £2,500
- Households on means-tested benefits will get £900 support payments next year
- £300 payments to pensioner households, and £150 for individuals on disability benefit
- Windfall tax on profits of oil and gas firms increased from 25% to 35% and extended until March 2028
- New 45% tax on companies that generate electricity, to apply from January
Economy and public finances
- The Office for Budget Responsibility judges UK to be in recession, meaning the economy has slowed for two quarters in a row
- It predicts growth for this year overall of 4.2%, but size of the economy will shrink by 1.4% in 2023
- Growth of 1.3%, 2.6%, and 2.7% predicted for 2024, 2025 and 2026
- UK's inflation rate predicted to be 9.1% this year and 7.4% next year
- Unemployment expected to rise from 3.6% to 4.9% in 2024
- Government will give itself five years to hit debt and spending targets, instead of three years currently
- Scheduled public spending will be maintained until 2025, but then grow more slowly than previously expected
- In England, NHS budget will increase by £3.3bn a year for the next two years, and spending on schools by £2.3bn
- It will mean larger payments to devolved governments in Scotland, Wales and Northern Ireland
- Defence spending to be maintained at 2% of national income - a Nato target
- Overseas aid spending kept at 0.5% for the next five years, below the official 0.7% target
Business and infrastructure
- Support worth £13.6bn over next five years to help firms with business rates, including a mixture of freezes and reliefs
- Import taxes removed on more than 100 goods, including some food products, for two years to reduce costs
- Plans for a possible online sales tax scrapped - the government argues online retailers' warehouses will be hit harder than shops through business rate changes
- Chief Scientific Adviser Sir Patrick Vallance to lead review into how post-Brexit regulation can support emerging technologies
Changes to the taxation of electric vehicles
It has been anticipated for some time that the government would have to transition from the current favourable taxation of electric vehicles to prevent a significant funding gap. This is starting with the introduction of vehicle excise duty on electric cars and further increases in the benefit-in-kind rates for employer-provided cars, although these will still favour electric cars.
From 1 April 2025, electric vehicles will no longer be exempt from vehicle excise duty (VED). VED will be introduced for electric cars, vans and motorcycles. Zero-emission vehicles registered on or after 1 April 2025 will pay the lowest rate of VED, currently £10, in the first year. This will increase to the standard rate, currently £165, from the second year of registration onwards. Zero-emission vehicles registered before 1 April 2025 will pay the standard rate from 1 April 2025. The expensive car supplement, levied on vehicles with a list price of over £40,000, will also apply to electric cars registered on or after 1 April 2025.
Stamp duty land tax
With effect from 31 March 2025, the cuts to stamp duty land tax in England and Northern Ireland announced at the 23 September mini-budget will be reversed.
Although the announcement has been made more than two years ahead of the change, this is likely to cause stress for those buying closer to the 31 March 2025 deadline as they race to get their purchase completed in time to benefit from the current £2,500 saving.
Posted on Nov 17, 2022.