The Chancellor, Jeremy Hunt has today outlined his plans for the economy, aimed at creating stability, encouraging growth, and supporting public services.

The chancellor argues that the most vulnerable in society will be protected by the measures introduced and the inevitable tax increases announced, whilst affecting everyone a little, will mean that those on the highest incomes, and those making the highest profits, will contribute a larger share.  

Here is a summary of the main announcements:

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Income Tax

The personal allowance of £12,570 and the higher rate tax threshold of £50,270 will now be frozen until 2028. This means that as pay increases and the thresholds don’t, more and more people will be pushed into the higher rate.

There was no mention of any planned reduction in the basic rate of Income Tax which remains at 20%.

The highest rate of Income Tax is 45% and currently applies to earnings above £150,000 however this threshold will reduce to £125,140 from April 2023. This is quite a change considering it was only in September that the 45% was going to be scrapped completely, with that decision being dramatically reversed.

Inheritance Tax

The threshold at which people start to pay InheritanceTax will also be frozen at £325,000 which is no real surprise as it has been frozen at that rate since 2009. No other changes to Inheritance Tax were announced which means that whilst this can be a costly tax it is also a tax than can be planned for and mitigated with sound advice.

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Dividends

The dividend allowance will be cut from £2,000 to £1,000 from April 2023 and then to £500 from April 2024.

Capital Gains Tax

The annual allowance before capital gains tax is paid will also be reduced from £12,300 to £6,000 in April 2023 and then to£3,000 a year later. This will bring many more people within the Capital Gains Tax charge when they sell assets and coupled with the 60 day reporting requirements for residential property gains, means Capital Gains Tax compliance will be an increasing burden for many.

Corporation Tax

As previously confirmed, the planned increase in Corporation Tax to 25% for companies with profits over £250,000 will go ahead from April 2023.

Reforms to Research and Development (R&D) tax reliefs 

The chancellor announced cuts to the relief for R&D expenditure by small and medium-sized enterprises. Relief by way of the ‘additional deduction’ will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. A consultation will be launched on the design of a single R&D scheme. The Government will introduce legislation to reform R&D tax reliefs by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targeting abuse and improving compliance.

Support with energy bills

At present, there is a government cap on domestic energy bills, known as the Energy Price Guarantee. It limits the price per unit of energy used and means that since October, a household using a typical amount of gas and electricity pays £2,500 a year.

That cap was due to expire in April, but the cap has been extended for a further 12 months, but at a less generous rate of £3,000 a year.

Cost-of-living payments revamped

The universal cost of living payments will end, with further support only available to targeted groups. There will be £900 paid to households on means-tested benefits, £300 to pensioner households, and £150 for those on disability benefits.

State pension changes

The chancellor confirmed that the state pension will go up by 10.1%, to match inflation.

That will see the "new" state pension, currently worth £185.15 a week, go up to £203.85. The basic state pension, for those who reached state pension age before April 2016, is currently £141.85 a week, and will go up to £156.20. That can be topped up for those on low incomes with pension credit, which will also go up by 10.1%.

The government's review on the age at which the state pension is received, currently 66 and going up to 67, will be published early next year.

Benefits increase with inflation

Universal credit and other means tested benefits will increase by 10.1% in line with inflation.

There will also be a cap on the increase in social rents in England at a maximum of 7% in 2023-24, rather than the 11% potential rise under previous rules.

National Living Wage

The National Living Wage is the minimum pay rate for those aged 23 and above, this is currently £9.50 an hour but it will rise to £10.42 in April 2023.

National Insurance

The National insurance Secondary threshold for employers will remain fixed at £9,100 from April 2023 until April 2028. However, many employers will continue to benefit from the employment allowance at the current rate of £5,000.

Stamp Duty Land Tax

In September, the government announced a cut in Stamp Duty Land Tax in England and Northern Ireland for house buyers which they said would be permanent.

The price at which stamp duty is paid was doubled from £125,000 to £250,000 (£425,000 for first time buyers) and discounted stamp duty for first-time buyers applied to properties up to £625,000, rather than £500,000.

The chancellor has now introduced a deadline which will see these cuts reversed at the end of March 2025.

Car tax for electric cars

The chancellor has announced electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025.

VAT registration and de-registration thresholds 

The registration and de-registration thresholds for VAT will be frozen at their current levels untilApril 2026. The VAT registration threshold for VAT is set at £85,000.

Business rates

Support to reduce the burden of business rates is being introduced. This includes freezing the multipliers, increasing relief for retailers, hospitality, and leisure to 75% and reforming transitional relief on revaluations of property.

Should you have any queries about any of the changes announced today and how they affect your personal circumstances please do not hesitate to get in touch.

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