AUTUMN STATEMENT - NOVEMBER 2022
After a whirlwind last few months, with a mini-Budget where the majority of the announcements were reversed very quickly (see our summary of what remains and what was reversed), a change in Prime Minister, an impact on markets, increased interest rates and yesterday’s announcement of inflation hitting 11.1%, we today had the Autumn Statement.
What was going to happen today had been pretty much set up by the Prime Minister and his Chancellor, although the exact detail was not known. The top-level plan having been heavily trailed in the media to make sure that the markets were not taken by surprise, so as to avoid the issues arising from the mini-Budget. Therefore, we were aware there was going to be a mix of public spending cuts and tax rises (although rises may be the wrong word). The Chancellor, Jeremy Hunt, had already set out in various interviews that he would be “asking more from those who have more,” acknowledging that the UK is in a recession but that the Government plans will help rebuild the economy and reduce debt.
The Chancellor stated there were no easy answers and gave some credit to his predecessors “Mini-Budget” regarding the growth theme (although he trashed it within three weeks) but stating unfunded tax cuts would not work. This statement had financial forecasts and impact statements! The specific announcements fitted around the main theme of The Chancellor’s speech.
Spending squeeze on all Government departments except for health, which includes the NHS and social care and, surprise, for education.
Tax rises, but other than windfall taxes in the areas expected (energy companies), it was more about freezing thresholds and cutting allowances. For example, the current Capital Gains Tax annual exemption is £12,300 per individual, from April 2024, this figure will be £3,000 per individual.
It could be viewed that The Chancellor was trying to avoid some of these political decisions being framed as “tax rises". Instead, freezing the threshold at which people start paying certain levels of tax means that when incomes increase, more individuals are dragged into higher tax brackets. There was one big tax bracket change, the rate at which you pay additional rate tax (45%, is being reduced from £150,000 to £125,140 from next April (“asking more from those who have more”). To think, less than two months ago, it had been announced the 45% tax rate was being abolished!
The tax burden is now at its highest for 70 years.
The Chancellor did make reference to the Prime Minister’s last budget when he held the role, continuing with the drive for the UK to become a high skilled, high wage economy, to drive productivity and growth, around the headings previously used:
An extra £2.3 billion per year for schools over the next two years, “being pro-education is being pro-growth”.
- Energy- The Chancellor stating that the way to a strong economy is cheap low carbon energy basis and the need to look at more renewables, announcing the funding commitment to the Sizewell C nuclear plant.
- Infrastructure – Continued commitment to capital expenditure, with capital expenditure budgets not being cut for two years, with commitments to HS2 to Manchester, the Northern Powerhouse rail, and for those local to Gloucestershire, the A417 Air Balloon roundabout
Make the UK better at turning innovation in to world class companies, with changes to rules introduced while part of the EU, increase competition, better access to funding and removing import duties on a significant list of products.
“We also want to protect the vulnerable" "to be British is to be compassionate and this is a compassionate government”
These measures were announced at the end of the Autumn Statement, and we felt replaced the usual surprise measures given at the end of a traditional Budget:
- All means-tested benefits, including Universal Credit, to rise in line with September’s inflation figure of 10.1% from next April.
- State pensions to rise in line with September's inflation rate of 10.1% from next April.
- Target support for the ‘cost-of-living’.
- Help with energy bills will be extended from next April, but not as generous as measures scrapped from the ‘Mini Budget’.
For those issues that were worrying our clients, following the usual headlines running in to the Budget:
- There was no increase in the main rate of capital gains tax, this is still 20%.
- Business Asset Disposal Relief – the 10% tax rate, remains.
- No further increases in dividend income tax rates.
As we predicted, there has been changes to R&D tax credits for SME’s, The Chancellor referring to the recent tax fraud, and the benefits in this area have been cut.
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