Earlier today, the government delivered their autumn statement, unveiling a £55bn package of measures designed to steer the country through this period of economic difficulty.
Whilst this may be the new government’s first official update on the state of the economy, it certainly isn’t Chancellor Jeremy Hunt’s first fiscal rodeo; you may recall his pretty sizeable intervention in the final days of the Truss administration.
What he announced that day was seen by many as ‘part one’ of the government’s financial assessment, with the eagerly awaited sequel released to the House of Commons this afternoon. Against a backdrop of inflation, recession, and an embattled economy, Mr Hunt had the unenviable task of charting the country’s course through these choppy waters. Here’s what he had to say…
Tax & National Insurance
After ditching the previous administration’s income tax plans and reversing the rise in National Insurance contributions earlier this month, Mr Hunt demonstrated that there was much more to come on the subject of taxation.
Firstly, the rate at which people pay the highest rate of income tax (45%) is to fall to £125,140. That’s something of a far cry from September’s Mini-Budget, when then-Chancellor Kwasi Kwarteng sought to abolish that particular tax band altogether.
As a result of today’s announcement, an estimated 250,000 more people will become additional rate taxpayers, while those earning over £150,000 will now pay an extra £1,243 in income tax each year.
Dividend tax and capital gains tax allowances have also been cut considerably.
At present, directors and entrepreneurs are able to earn up to £2,000 a year before paying any dividend-related taxes. After that, those paying the basic rate of tax pay 8.75% on any dividends they draw from their company. Higher-rate payers pay 33.75% and those earning north of £150,000 a year pay 39.35% in dividend tax.
However, as of next April, the tax-free dividend allowance will drop from £2,000 to £1,000, and will halve again to £500 the following year; a significant change for many limited company directors who receive remuneration via company dividends.
What’s more, this comes on the back of a 1.25% increase on the taxing of dividend income which was introduced earlier this year during Rishi Sunak’s time as Chancellor. It may not thrill you to know that the allowance was as high as £5,000 only four years ago.
Meanwhile, the tax-free allowance for capital gains tax is to be slashed significantly over the next two tax years as well. It currently stands at £12,300. However, in April the figure will be £6,000 and, the following year, (April 2024) it will tumble to £3,000.
Mr Hunt has also frozen the thresholds for Income Tax and National Insurance contributions for a further two years – until April 2028. It’s the same story for personal allowance and higher-rate thresholds, as well as the ‘nil-rate band’ for inheritance taxpayers too.
So, rather than increasing thresholds in line with inflation, the tax-free personal allowance in England, Wales, and Northern Ireland will stay at £12,570 (or £50,270 for higher-rate taxpayers). This means that approximately three million more people will be paying higher-rate tax by the year 2026.
As we knew already, the £2,500 energy price cap (plus the energy bill relief scheme for businesses) was to remain in place until the spring, as a counter to escalating energy bills. Having initially said that this package would be in place for up to two years, the government faced criticism for changing tact.
So, today, the Chancellor moved to address that by extending the initiative for a further 12 months. The caveat being that typical bills will instead be capped at £3,000 instead of £2,500. The government predicts that this will still save households an average of £500 a year.
Further to this, the windfall tax on the mammoth profits of oil and gas companies has gone up by 10% (from 25% to 35%) and will be in place until at least the end of the 2027-2028 tax year.
A 45% tax on firms that generate electricity will also come into force in the New Year.
On the subject of pensions, the Chancellor confirmed the continuation of the much-talked-about triple lock. So, state pension payments, along with disability and means-tested benefits, will rise in line with inflation – increasing by 10.1%.
The full annual state pension amount will go above £10,000 for the first time next year and pensioners will also receive payments of £300 to help with their energy bills.
The situation as regards to stamp duty in England and Northern Ireland will remain as is – one of the few remaining measures still standing from the Mini-Budget.
So, to be clear, no stamp duty is paid on the first £250,000 of a property’s value. And, the threshold for first-time buyers stays at £425,000.
The Chancellor, though, has declared that this will change in 2025, with the stamp duty cuts set to reverse from the 2025-2026 tax year onwards.
Amidst rising interest rates, there wasn’t much mentioned in the way of mortgages in today’s statement. In fact, aside from the issue of stamp duty rates, the property market was conspicuous by its absence. You can read how many of those inside the industry reacted to that, here.
While house prices are falling, inflation and interest rates are rising, making it a confusing time for homeowners and prospective buyers alike.
With that in mind, our message remains the same. If you’re currently on a fixed, tracker or discount mortgage deal, your rate is likely to increase if you allow your mortgage to move to Standard Variable Rate (SVR). So, make sure you avoid paying unnecessarily inflated rates by getting in early and planning your re-mortgage well in advance.
Book a consultation with Sharon, our Mortgage & Protection Specialist, now and make the most of your next mortgage deal.
- The repeal of IR35 that we covered previously has been maintained. So, the responsibility for determining the employment status of those who provide their services via an intermediary – such as a personal service company – remains with the end client.
- From next April, the national living wage for people over the age of 23 will increase by almost £1, from £9.50 to £10.42 an hour.
- Defence spending will remain at the NATO target of 2% of GDP.
- Conversely, overseas aid spending is still 0.2% lower than the official target of 0.7%.
- From April, local authorities will have the authorisation to raise council tax bills by up to 5% without the need to hold a referendum.
- The married couple’s allowance is to increase in line with inflation.
- As of April 2025, electric vehicles will no longer be exempt from paying road tax.
- And, import tax has been removed for up to two years on over 100 goods. This includes some food products.
Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.
His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.
He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.