Last week the autumn statement was announced against the fallout of the mini-budget, rising inflation and the recent interest rate rise. But what was announced?
Chancellor Jeremy Hunt last week set out plans to fill the £55bn deficit in the government’s finances, caused by the recent mini-budget, by raising taxes and cutting spending.
The Chancellor confirmed that the UK is in recession, and the Office for Budgetary Responsibility (OBR) believes that the downturn will now be less severe as a result of the autumn statement measures which will be implemented. The OBR believes the economy will grow by 4.2% this year before contracting 1.4% next year and recovering to 1.3% in 2024. Inflation will average 9.1% this year but will fall in 2023.
Income tax thresholds will be frozen at their current levels for six years, with the basic rate of 20% charged on all earnings over £12,570 until 2028 and 40% charged on earnings over £50,270. High earners will be pulled into the top income tax rate from £125,410 (down from the current £150,000). There is a freeze on the thresholds for National Insurance.
With activity expected to slow down, the former stamp duty threshold will be reinstated in 2025, although this stamp duty freeze doesn’t apply to buying in Scotland.
The cap on council tax increases has been lifted, enabling councils to raise council tax by 5% without a referendum. This will vary from council to council, but we could see many bands going up.
Capital gains tax is charged at 18% on residential property and 10% on other assets for basic rate taxpayers and 28% and 20%, respectively, for high rate taxpayers. The first £12,300 of gains are tax-free. It was announced that the tax-free threshold is being reduced from £6,000 to £3,000 from April 2024. This will affect those selling buy-to-let properties, not their main home.
The inheritance tax threshold has been frozen at its current level, and couples can still combine their allowances and assets left to a spouse, or a civil partner will not be liable for the tax. The cap on social care costs will be delayed by two years – this would have meant that there would be a cap of £86,000 on what individuals will spend on social care, limiting the number of elderly people having to sell their family home for care costs.
The Energy Price Guarantee, limiting average household energy bills to £2,500 a year, would be reviewed at the end of March, but it was announced it will remain in place but be increased to £3,000 a year for a further 12 months.
In addition, those on means-tested benefits would receive a one-off £900 cost-of-living payment, while pensioners would get £300, and anyone receiving disability benefits would receive £150. The state pension and means-tested benefits will be increased by 10.1%.
People renting their homes from a social landlord will have rent increases capped at 7% for 2023/24.