It has been a tumultuous year in British politics, with three prime ministers and four chancellors holding office. After the calamitous “mini-Budget” ushered in the demise of Liz Truss and Kwasi Kwarteng, new chancellor Jeremy Hunt has delivered his first autumn statement. Hunt’s speech came at a tricky time for the UK economy, with inflation at a 41-year high and the Bank of England (BoE) reporting that the economy is expected to be in a recession for a prolonged period. Hunt said his plan was designed to “strengthen our public finances, bring down inflation and protect jobs”.
Here are the key points of the autumn statement, and what they might mean for you.
A reduction in tax-free allowances and exemptions
As part of his plan to raise tax revenue, the chancellor announced reductions to two key tax allowances.
These two combined measures will raise more than £1.2 billion a year from April 2025.
Inheritance Tax thresholds frozen for a further 2 years
The Inheritance Tax (IHT) nil-rate band has been at its current level of £325,000 since April 2009. The additional residence nil-rate band is set at £175,000 and normally applies if you leave your home to a child or grandchild. These two thresholds had already been frozen until 2026. The chancellor announced an extension to this freeze, meaning that the nil-rate bands will remain at these levels until at least 2028.
Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an IHT liability. As house prices and asset values rise, it is likely that more estates will face an IHT bill over the next five years.
A cut to the level at which you pay additional-rate Income Tax
In a considerable change of direction from the former administration, Hunt reduced the threshold at which individuals pay additional-rate Income Tax. Unlike his predecessor, Kwasi Kwarteng, who abolished the additional rate of tax (45%) – a move that was swiftly reversed – Hunt’s announcement means higher earners will pay 45% tax on more of their earnings. The 45% rate will now apply for earnings above £125,140 rather than the previous level of £150,000. It means if you earn £150,000 or more, you will pay just over £1,200 more in Income Tax each year.
Hunt also froze the Income Tax Personal Allowance – the amount an individual can typically earn before paying Income Tax – at the current level of £12,570 until 2028. Additionally, he fixed the higher-rate threshold at £50,270 and the National Insurance thresholds at their current level to 2028. All these measures are also likely to increase your personal tax burden. As earnings rise, more of your income will be subject to tax than if the allowances had risen in line with inflation.
The State Pension “triple lock” to be honoured
Under the “triple lock”, the State Pension increases each year by the higher of:
After months in which no senior politician would commit to honouring the government’s pledge, Hunt announced that he would increase the State Pension in line with inflation. This means pensioners can expect a boost of just over 10% to their State Pension from April 2023. For someone on the full, new State Pension, that will represent an additional payment of more than £900 a year. Pension Credit will also rise by 10.1% in April 2023 and benefits will be uprated by inflation, too.
As a result of uprating both working age and pension benefits, around 19 million families will see their benefit payments increase from April 2023.
An increase in the Energy Price Guarantee
Hunt announced that the government’s Energy Price Guarantee – an initiative of the Truss administration – would continue in its present guise until April 2023. Under the guarantee, for six months from 1 October 2022, the average household will pay energy bills of around £2,500 a year. The scheme will then become less generous from April 2023. The guarantee will rise to £3,000 for a further 12 months, meaning your energy bills will likely rise again in the spring. The government say this equates to an average of £500 support for households in 2023/24.
There will be additional support for more vulnerable households.
Increase to windfall taxes
Jeremy Hunt announced a significant increase in windfall taxes. The oil and gas companies' tax rate will increase from 25% to 35% of profits on UK operations from January 2023 until March 2028, extended from December 2025. There will also be a 45% tax on profits of older renewable and nuclear electricity generation. Together, these measures will raise more than £55 billion from this year until 2027/28.
Stamp Duty reductions to end in 2025
In September’s “mini-Budget”, Kwasi Kwarteng announced some increases in the thresholds at which Stamp Duty would be payable. The £125,000 threshold increased to £250,000 while he increased the minimum threshold for first-time buyers from £300,000 to £450,000. Jeremy Hunt announced that while these changes will remain, they will now be time-limited, ending on 31 March 2025. They are designed “to support the housing market and the hundreds of thousands of jobs and businesses which rely on it”.
Get in touch
If you have any questions about how the autumn statement will affect you and your finances, please get in touch.
All information is from the autumn statement 2022 document and the government’s autumn statement news bulletin.
The content of this autumn statement summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
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