Chancellor Jeremy Hunt stood up to deliver his crunch Autumn Statement, with Rishi Sunak's Government eager to repair Britain's reputation for fiscal discipline after September's disastrous mini-budget.
Jeremy Hunt has delivered billions of pounds of extra NHS and schools funding but launched a slew of stealth taxes to shore up the country's finances in a belt-tightening Autumn Statement.
The Chancellor has frozen or cut a number of tax thresholds, extended the windfall tax on energy producers and put the squeeze on department budgets.
Mr Hunt said his plan will lead to a shallower recession and higher long-term growth as he promised to prioritise "stability, growth, and public services". He found a total of £55bn in tax increases and spending restraints to help boost the country's coffers
He said: "British families make sacrifices every day to live within their means and so too must their government because the UK will always pay its way."
Here are all of Mr Hunt's measures from the Autumn Statement:
Economic forecasts & fiscal rules
The Office for Budget Responsibility warned that the UK is already in a recession as it delivered a grim set of forecasts to the Chancellor. GDP will fall 1.4% in 2023 before bouncing back to growth of 1.3% in 2024. It predicted that the UK’s inflation rate will be 9.1% this year and 7.4% next year. Inflation peaks at 11% this quarter.
The OBR predicted that borrowing will hit 7.1% of GDP, or £177bn, in 2022/23 and 5.5% of GDP, or £140bn, next year, far worse than previous forecasts. Back in March, the OBR predicted that borrowing would hit £99bn in 2022-23 and fall to £50bn in 2023-24.
Debt is is expected to hit a peak of 97.6% of GDP in 2025-26, a 63-year high, before falling to 97.3% in 2027-28.
The Chancellor set new fiscal rules: underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period and public sector borrowing, over the same period, must be below 3% of GDP.
Tax changes
The OBR predicted that the tax burden will hit a record high of 37.5% as a share of GDP in 2024-25. Taxes as a share of the economy will rise to 36.4% of GDP this year and 37.4% in 2023-24, breaking the previous record.
The threshold for the top rate of income tax has been cut from £150,000 to £125,140, dragging hundreds of thousands of workers into the highest tax band.
The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen for a further two years until April 2028. This fiscal drag effect will mean that millions of people will either start paying certain taxes or be dragged into higher bands.
Mr Hunt slashed tax-free allowances on dividends and capital gains tax. The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024.
The windfall tax targeting the profits of energy companies is being extended. From January 1st until March 2028, the Energy Profits Levy will rise from 25% to 35%.
The Chancellor said that electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025.
The Employers NICs threshold will be frozen until April 2028 but the employment allowance will be kept at its high level of £5,000.
45p TAX NOW KICKS IN AT £125,140: HOW MUCH MORE WILL PEOPLE PAY?
| Salary | Tax before | Tax after | Impact |
|---|---|---|---|
| £130,000 | £44,460 | £44,703 | £243 |
| £135,000 | £46,460 | £46,953 | £493 |
| £140,000 | £48,460 | £49,203 | £743 |
| £145,000 | £50,460 | £51,453 | £993 |
| £150,000 | £52,460 | £53,703 | £1,243 |
| £160,000 | £56,960 | £58,203 | £1,243 |
| £170,000 | £61,460 | £62,703 | £1,243 |
| £180,000 | £65,960 | £67,203 | £1,243 |
| £190,000 | £70,460 | £71,703 | £1,243 |
| £200,000 | £74,960 | £76,203 | £1,243 |
| Impact remains level at £1,243 above previous £150,000 threshold. (Source Quilter / ThisisMoney.co.uk) |
Spending
The NHS and schools have been given a multi-billion boost to their budgets but overall department spending will be squeezed in the coming years.
Department budgets set out for the next two years at the 2021 Spending Review will be kept despite being significantly eroded by high inflation.
Resource spending will rise 1pc a year in real terms for the following three years. The Chancellor said overall spending on public services will still increase in real terms over the next five years.
The NHS budget will increase by an extra £3.3bn in both of the next two years. Social care funding will climb by £2.8bn next year and £4.7bn the following year, Mr Hunt said. It includes extra social care grant funding of £1bn next year and £1.7bn the year after.
Schools will be given by an extra £2.3bn in both 2023/24 and 2024/25.
Next year's increase in benefit and pension payments will be tied to inflation, Mr Hunt confirmed, while pension credit will rise by 10.1pc.
Mr Hunt said the defence budget will remain at at least 2pc of GDP and he delayed the return to an international aid target of 0.7pc of GDP. It was cut to 0.5pc of GDP during the Covid crisis.
Public investment will not be slashed in the coming years as he confirmed that capital spending on HS2, Northern Powerhouse Rail and new hospitals will go ahead. Research and development spending has also been protected and will hit £20bn by 2024/25.
Energy
The cap on energy bills will continue for a further 12 months but will rise from £2,500 to £3,000. He said this is expected to provide households an extra £500 of support on average.
An extra £900 of energy bills support will be provided to households on means-tested benefits, £300 more will be given to pensioners and £150 will be given to those on disability benefit.
The Government will double investment in energy efficiency to hit a new aim of reducing energy consumption from buildings and industry by 15pc by 2030. An extra £6bn of funding to boost energy efficiency will be provided from 2025.
Mr Hunt confirmed that the Government will proceed with the new nuclear power plan at Sizewell C.
Other
Mr Hunt said that changes to leftover EU regulations in five growth industries - digital technology, life sciences, green industries, financial services and advanced manufacturing - will be reviewed by the end of next year.
The Treasury will also publish its decision on the Solvency II rules, which could unlock investment by cutting the buffers insurers are forced to hold.
The National Living Wage will increase next year by 9.7pc, pushing up the hourly rate to £10.42 from April.
Work and Pensions Secretary Mel Stride has been tasked with carrying out a view into how to tackle Britain's rising economic inactivity rates as more workers drop out of the jobs market.
Autumn Statement 2022 – Landlord Reactions
Whilst on the face of it not as severe as many predicted, Hunt took great care not to use the words ‘tax rises’ but everyone will be paying more tax – especially landlords.
He told MPs that the country is in recession and the economy will shrink by 1.4% next year. Government forecasters are effectively predicting a shallow but long recession.
Landlords who are higher-rate taxpayers have been hit with a multiple whammy.
Mr Hunt announced that:
Landlords will be hit when they sell a property because the annual exempt amount for capital gains tax will be reduced from £12,300 to £6,000 in 2023 – then from April 2024 to £3,000.
Inheritance Tax thresholds will be frozen for the next 2 years – The threshold currently stands at £325,000 with a further residential nil rate band set at £175,000. The threshold for Inheritance Tax was previously set by Rishi Sunak when he was Chancellor at £325,000 until April 2026. Now Mr Hunt has extended this until April 2028.
The Stamp Duty cuts announced in September will remain to protect the housing industry, but be time-limited, ending on March 31st 2025.
While no rent freeze for the Private Rented Sector has been announced, the Chancellor revealed that social housing rent rises will be capped at 7% to save the average tenant £200 next year.
For first-time buyers the rate where no tax is paid will fall from £425,000 to £300,000, while the maximum price at which first time buyers’ relief can be applied will fall from £625,000 to £500,000.
Tom Bill, head of UK residential research at Knight Frank, said: “By reversing the stamp duty cuts announced in September from April 2025, the government has effectively announced a 28-month stamp duty holiday.
“It may help stimulate activity closer to the deadline but it appears to contradict the message sent by the government during the pandemic that a liquid housing market was good for social mobility and had wider economic benefits.”
In the Autumn Statement the government have confirmed a number of tax relief changes to take effect from April 2023, and included an emphasis on tackling tax avoidance, evasion and wider non-compliance. The changes are summarised as follows:
Jeremy Hunt announced in his Autumn Statement that Stamp Duty would rise in April 2025, higher CGT bills for landlords and other measures that will affect agents.
Coperation Tax
Corporation Tax rate increasing from 19% to 25%, this will effect landlords who hold their properties in limited companies.
Capital gains tax relief allowance halved
From 2023, the Annual Exempt Amount for capital gains tax will be cut from £12,300 to £6,000, and then cut again to £3,000 from April 2024.
“This will be unwelcome news for landlords, second home owners and those looking to sell their property as capital gains tax is applied at a much higher rate for residential property sales," says Jamie Morrison, Head of Tax at HW Fisher.
Stamp duty cut to remain - but only until 2025
The Chancellor shared that “the OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until March 31 2025.”
This means that the threshold of the price of a property before stamp duty is paid will stay at £250,000, up from the previous threshold of £125,000 - but now for a time limited period.
Social housing sector rent cap to be introduced
The social rented sector is currently expecting rent hikes of up to 11% next year, which is why the government has announced a 7% cap on rent increases for social rents in 2023-24. This will help tenants save around £200 next year.
Matt Cowen, Senior Associate at Winckworth Sherwood, says: “No doubt there remain tough times ahead for many social housing tenants squeezed by the cost-of-living crisis, but the introduction of this rent cap will partly mitigate the 11.1% rent increases that would have otherwise taken effect from next April, being September’s CPI rate of 10.1% plus 1%.
“It should also be remembered that the rent cap announced today does not apply to shared ownership rents or private sector rents.”
Dividend allowance will be cut from 2023
The dividend allowance will be cut from £2,000 to £1,000 in 2023, and then drop further to £500 in April 2024.
This will affect any landlords using limited company structures - a growing band of landlords - as they pay themselves and other shareholders dividends from their rental profits.
Deadline on stamp duty a ‘really bad idea’, says industry
The industry has slammed the decision in this week’s Autumn Statement to end stamp duty cuts at the end of March 2025.
Chancellor Jeremy Hunt said time-limiting the cuts, which were introduced in the September mini-Budget, would help firms that rely on the housing market to get through the current challenges, while strengthening the public finances in the longer term.
However, Richard Campo, founder of broker firm Rose Capital Partners, said putting a deadline on the stamp duty cuts was a “really bad idea”. He predicted that it would create a rush to complete deals ahead of the deadline, pushing prices up artificially.
“The only good thing that came of the infamous mini-Budget was that the stamp duty allowance wasn’t time limited,” he added.
Paul Woodward, finance director of regional housebuilder AJC Group, agreed. He described the decision to end the threshold rises on 31 March 2025 as ”disappointing” and added: “We have already seen signs that this recently introduced measure is helping hard-working people to get a foothold on the ladder.”
Meanwhile, Propertymark chief executive Nathan Emerson said the orgaisation’s member agents had reported that the raised stamp duty threshold had ”a positive effect on the confidence of their buyers and sellers, so we’re naturally disappointed it will be phased out by 2025”.
In September’s mini-Budget, former chancellor Kwasi Kwarteng increased the nil-rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000.
The maximum purchase price for which First Time Buyers’ Relief can be claimed was also increased from £500,000 to £625,000.