Just a matter of weeks into his role as Chancellor, Jeremy Hunt delivered his first Autumn Statement to deal with the fallout of the controversial mini-budget by his predecessor, Kwasi Kwarteng.
To address the £55 billion gap in public spending, the Chancellor took aim at tax thresholds and spending cuts in a bid to curb Government borrowing.
It wasn’t all doom and gloom, however, as Hunt also announced measures to help protect smaller businesses against rising bills.
Here’s a summary of the main points from the Autumn Statement.
One of the most significant announcements from the Chancellor was lowering the additional-rate tax threshold from £150,000 to £125,140 from April 2023, which will raise taxes for around 250,000 people. This cut is expected to raise an extra £420 million over the 2023/24 tax year.
The capital gains tax allowance will also be cut from next year, from £12,300 to £6,000. In 2024/25, the allowance will be cut again to £3,000.
There will also be a number of tax threshold freezes which will result in higher income tax bills when pay is increased. These include:
- income tax – frozen at £12,570 until 2028
- National Insurance – frozen at £12,570 until 2028
- inheritance tax – frozen at £325,000 until 2028.
The tax-free dividend allowance will also be slashed from £2,000 to £1,000 in April 2023. It will then be halved to £500 in 2024/25.
Hunt continued to undo Kwarteng’s announcements from the mini-budget, by announcing that corporation tax will indeed increase to 25%. Previously, Kwarteng had intended for it to stay at 19% in order to ‘encourage growth.’
Although there was some disappointment over the news that business rates revaluation is still due to take place next April, the Government still addressed the higher rates through relief and support.
From 1 April 2023, many businesses will face new business rate bills following new valuations of properties to reflect the market. To combat this, the Government has set out a package worth £13.6bn.
The measures will include the following:
- Freezing business rate multipliers for another year to protect businesses from rising inflation.
- Extended and increased relief for retail, hospitality and leisure businesses worth almost £2.1bn.
- Protection for small businesses who lose eligibility for the small business or rural rate relief.
- The retail, hospitality and leisure relief scheme will increase from 50% to 75% for 2023/24, up to £110,000 per business.
The SME R&D relief scheme is also set to change, with the additional deduction decreasing from 130% to 86%. The SME credit rate will also be reduced from 14.5% to 10%.
The Chancellor explained that this change is set to rebalance the two R&D schemes and minimise the number of fraudulent SME claims.
According to the Office for Budget Responsibility (OBR), the economy will have grown by 4.2% in 2022 but will be in a recession throughout 2023.
The department forecasts that GDP will rise by 1.3% in 2024, returning to pre-pandemic levels, and should grow to 2.6% in 2025.
The OBR said that inflation has already peaked at 11% and will fall sharply in 2023. It’s expected to return to 2% by 2027.
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