The Autumn Statement – Is this the final one?
Today we heard from the fourth Conservative Party Chancellor of the Exchequer of 2022 deliver the third/fourth Budget of the year but he was not going to make the exact same mistakes of his predecessor, he had at least consulted with the Office of Budget Responsibility ‘OBR’ before delivering his plan to the country. Hopefully that means that the announcements carry credibility and the markets will not be shaken.
What have we heard today that we have not heard in the last week? Nothing drastically new! As appears to be the norm now, the government continue to leak the main announcements to test the water and ensure we aren’t shocked on the day! It appears to be working.
We were told it was going to be painful and for taxpayers it is!
Personal Taxes
From April 2023, the number of top earners paying income tax at 45% will increase significantly (some say the changes will bring up to 250,000 earners into the higher rate tax threshold). The threshold at which the 45% rate is payable reduces from £150,000 to £125,140. Apparently this will cost an extra £1,250 in tax for those affected.
Let’s not forget that those who earn more than £100,000 are hit with a reduction in their personal allowance, at £125,140 their personal allowance is lost entirely, resulting in an effective rate of tax of 60% for earnings between £100,000 and £125,140. The government would say if you are affected by these changes you should count yourself lucky as you are regarded by them as a high earner!
While inflation continues to rise, you might count yourself fortunate that you receive a pay rise in the New Year, well stealth taxes will ensure that the state takes more of the reward for your hard work. Personal allowances and the main rate of national insurance contributions ‘NIC’ are to be frozen for a further two years until April 2028.
In other areas, the tax-fee dividend allowance already reduced from £5,000 to £2,000 will be further reduced to £1,000 in 2023-24 and then to £500 in 2022-25. In addition, the capital gains tax annual exemption will be more than halved to £6,000 and then halved further to £3,000 the year after. This will not be the only cost to those affected, if they previously have not submitted a self-assessment tax return, they will now find themselves having to pay a professional to help them to prepare and submit a return to HMRC.
Successive governments for the last 17 years kept the nil rate band at its current rate of £325,000, how much has the value of your home (most likely to be the most valuable asset you own) increased over this period? The freezing of the nil rate band for all these years has meant a sizable increase in the number of estates having to pay Inheritance Tax. You work and save hard all your life, you pay your taxes on those earnings and savings, you don’t regard yourself as rich, but your estate is likely to be subject to Inheritance Tax at 40%, 17 years ago this tax was the preserve of those regarded to be rich.
Energy
The energy price cap has been extended for one year beyond April 2023, although it becomes less generous again with the bills for an ‘average’ household being capped at £3,000 for the year.
There will be further support due to the increase in energy prices for those on means-tested benefits, pensioners and those receiving disability benefit.
The energy companies will help the government fill the black hole in our finances through increased windfall taxes. Windfall tax on oil and gas companies will increase from 25% to 35% until March 2028. Furthermore, companies that generate electricity will pay 45% tax.
Spending
The NHS budget will increase by an extra £3.3bn per annum for the next two years. What a great headline! However, a somewhat meaningless sum when you consider that NHS England state that their annual budget for 2022/23 is £153bn, inflation is double digits, so in real terms they’ve been given a further 2% per annum while inflation runs at five times that rate. There is going to be a need for a significant amount of savings to be found within the NHS, to meet the challenges of the post-COVID waiting list it is dealing with.
Schools will get an extra £2.3bn next year and the year after. Schools have probably fared a little better than the NHS (as a percentage) with annual spending at around £100bn per annum.
The Chancellor confirmed that HS2 train line to Manchester will go ahead, along with other national infrastructure investments, including the nuclear power plant Sizewell C.
Business
Corporation Tax will increase to 25% from April 2023 as announced in the catastrophic last ‘this is not a budget’ from the Truss government.
There is to be a £13.6bn package to support businesses with business rates, in addition there will also be a revaluation of properties with effect from April 2023 to help those paying business rates.
Transport
The expected change to the taxation of electric cars was confirmed, from April 2025 electric vehicles will no longer be exempt from paying road tax, aka Vehicle Excise Duty (VED). It appears that zero-emission cars registered from April 2025 will be subject to the lowest rate of VED in the first year, currently £10 and then from the second year will be subject to the standard rate, currently £165 per annum.
Some days you must wake up and feel like you just dreamt that the last 3 years have been chaotic and turbulent, unfortunately it wasn’t a dream and the nightmare for most continues!
If you would like to discuss the changes and how they will affect you and your business, please contact us.