What does the Autumn Statement mean for me?
Ali Bowen, Lecturer in Tax, breaks down what the new tax rises mean for individuals, businesses and the oil and gas industry.
The warnings have been coming in thick and fast from both the new Chancellor, Jeremy Hunt, and the prime minister, Rishi Sunak: the UK is heading for austerity. The promises of tax rises - an attempt to stabilise the UK’s troubled economy - were realised in today’s statement.
What does the Autumn Statement mean for me?
1. Highest earners will pay more.
The top rate of income tax - 45% - will be paid on earnings above £125,140, instead of the current £150,000. This will hit the higher earners.
2. Frozen: Income tax threshold and personal allowance.
The higher rate personal income tax threshold and personal allowance is to be frozen until April 2028. This means an effective tax increase for all individuals that are higher rate taxpayers – individuals earning over £50,270. In the past we have generally seen the tax band rise in line with either inflation or earnings.
3. Frozen: National insurance and inheritance tax thresholds.
National Insurance (NIC) and inheritance tax (IHT) thresholds are also frozen until April 2028. IHT thresholds haven’t increased for years but NIC thresholds usually increase annually. Again, this equates to an effective tax increase.
4. Returns on investment assets diminish
Dividend and capital gains tax free allowances are to be reduced from April 2023 and further reduced in April 2024. Such measures will mean an individual that receives dividend income of more than £2,000, will see their taxable income and therefore their tax liability increase. Similarly, if an individual realises chargeable gains, more of those gains will be chargeable to capital gains tax.
5. Minimum wage increases, but not with the rate of inflation.
For those over 23, the minimum wage will rise to £10.42 from £9.50. This is better than no increase to those on lower incomes struggling with the cost-of-living crisis. However the percentage increase is well below the rate of inflation, which many will see as a disappointing move by the Chancellor.
6. State pension gets triple lock increase.
The state pension, means tested and disability benefits to rise by 10.1% - retaining the triple lock promise which many feared the Chancellor wouldn’t honour. This will be a huge relief for many of the most vulnerable in our society.
What does the Autumn Statement mean for businesses?
There were no significant changes to the taxation of businesses, apart from companies in the oil and gas industry (see more below), confirming the Government’s commitment to support UK businesses in this difficult global economic environment.
What does the Autumn Statement mean for oil and gas?
- The windfall tax on oil and gas company profits is rising from 25% to 35%. These measures are extended to March 2028.
- Companies that generate electricity to suffer new ‘temporary’ 45% tax rate from January 2023.
- There will still be household support offered for energy costs, but over time they will become less generous.
In summary, the Autumn Statement is as good as can be expected in the current economic turmoil. The Government is trying to tackle a number of conflicting pressures: inflation at a rate the UK hasn’t seen for years, a cost-of-living crisis, all coupled with what looks like the start of the worst recession the UK has faced for decades.
Only time will tell if the Chancellor’s plan unveiled today will help claw the UK economy out of the current turmoil.
