Autumn Statement 2022
Why is the Autumn Statement such a big deal?
There are a lot of big decisions to be made about Britain’s future.
After the disastrous September Mini-Budget and its political fallout, the UK government needed to steady their ship. Eyes fell to the newly elected Chancellor of the Exchequer, Jeremey Hunt, appointed by our new Prime Minister, Rishi Sunak. Specifically, many wanted to know what was in store with the upcoming Autumn Statement.
The Autumn Statement is one of the most significant financial events in the UK calendar.
It’s an annual economic update delivered by the Chancellor of the Exchequer to report on the country’s economic progress. It also provides insight into the government’s thinking on various critical issues — for example, their plans for spending and taxation for the coming year.
This year’s statement is notably grave because it comes after unprecedented economic turmoil.
The government’s significant challenges still include Brexit and Covid-19. However, Putin’s illegal war in Ukraine has contributed to a surge in energy prices, driving inflation worldwide. The International Monetary Fund (IMF) expects a third of the global economy to fall into recession this year or next. With so much at stake, it’s no wonder that businesses and households are eagerly awaiting this year’s statement. Many commentators have suggested that it could be a make-or-break moment for the UK economy.
The government is under pressure to use the Autumn Statement to kickstart the economy and boost jobs and growth.
It’s widely estimated that UK public finances are down by £55bn, and inflation pressure is sharply mounting. Despite both Chancellor and Prime Minister’s keenness to avoid a ‘return to austerity policies’, the UK’s tax is at a 70-year high. Therefore, it was only a matter of time before they delivered a full-blown fiscal breakdown. The Chancellor outlined this via three priorities: stability, growth and public services. The new budget offers a double feature of record-breaking tax rises and austerity 2.0.
The key takeaways of the Autumn Statement 2022 are as follows
- Reducing the annual exempt amount for capital gains tax from £12,300 to £6,000 and then to £3,000 the following year.
- Reducing the additional rate threshold at which the 45% rate of income tax is charged from £150,000 to £125,140.
- Freezing the personal tax allowance until 2028.
- The dividend allowance 0% band will be cut from £2,000 to £1,000 and then to £500 the following year.
- Any couples looking to sell property could therefore be paying £3,528 more in tax after April 2023.
We’ve bullet-pointed each section below to make things as digestible as possible.
Taxation & Wages
- From next April, the legally-enforceable minimum wage for people aged over 23 will rise from £9.50 to £10.42 an hour
- The state pension and means-tested and disability benefits will increase by 10.1% in line with inflation
- With the exception of Scotland, the top 45% additional rate of income tax will apply to earnings over £125,140 instead of £150,000
- The income tax personal allowance and higher rate thresholds will remain frozen for a further two years, until April 2028
- Until April 2028, the main National Insurance and inheritance tax thresholds will remain frozen for a further two years
- Capital gains tax and dividends tax-free allowances are also scheduled to be cut next year and in 2024
- From now on, councils in England will be able to raise council tax up to 5% a year without a local vote instead of the current 3%
- Typical household energy bills can now be capped at £3,000 a year rather than £2,500, extending the cap for another year after April
- Next year, households receiving means-tested benefits will receive support payments of £900
- Pensioner households will receive £300, while recipients of disability benefits receive payments of £150
- Oil and gas company windfall profits are now subject to a 35% windfall tax, up from 25% until March 2028
- A new 45% tax on electricity-generating businesses will take effect in January
Economy & Public Finances
- The Office for Budget Responsibility estimates that the U.K. is in a recession, meaning that the economy has slowed down for two consecutive quarters
- OBR forecasts growth of 4.2% for the year as a whole, but the size of the economy will decline by 1.4% in 2023
- 1.3%, 2.6% and 2.7% growth is projected for 2024, 2025 and 2026
- The inflation rate in the United Kingdom is expected to be 9.1% this year and 7.4% next year
- In 2024, the unemployment rate is anticipated to escalate from 3.6% to 4.9%
- Rather than the proposed 3 years, the UK Government will give itself 5 years to meet its debt and spending targets
- Planned public spending will carry on as expected until 2025 but will increase far more slowly than previously expected
- For the next two years, the NHS budget will increase in England by £3.3bn, while spending on schools by £2.3bn a year
- Therefore, larger payments will pass to devolved governments in Scotland, Wales and Northern Ireland
- To hit one of several NATO targets, spending on Defence is to be maintained at 2% of national income
- Meanwhile, spending on Overseas aid is to be kept at 0.5% for the next five years — which is below the official 0.7% target
Business & Infrastructure
- The government will provide businesses with £13.6bn worth of business rate support over the next five years, including a mixture of freezes and reliefs
- To reduce costs, over 100 goods — including some food products — have been exempt from import taxes for two years
- A possible online sales tax has been scrapped by the government, as it argues business rate changes would be tougher on online retailers’ warehouses than on shops
- The Chief Scientific Adviser, Sir Patrick Vallance, will lead a review of how emerging technologies can be supported by post-Brexit regulations
- A two-year delay has been granted to the lifetime cap on social care costs in England, which was due in October 2023
- As a result of inflation, social housing rent increases in England will be capped at 7% from next April instead of 11%
- Vehicles powered by electric motors, vans, and motorcycles will have to pay road taxes starting in April 2025
- Suffolk will get an elected mayor — with mayors for Cornwall, Norfolk and an area in north-east England to follow
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