A summer of political turmoil was capped in the autumn by financial instability and high-profile resignations. The fallout from Kwasi Kwarteng’s “mini-Budget” spooked markets and helped to hasten the end of Liz Truss’s blink-and-you-miss-it tenure as prime minister.
Jeremy Hunt entered Number 11 in October and quickly found he had a new neighbour.
Under Rishi Sunak’s leadership, Hunt promised a swift U-turn on “Trussonomics” and some “tough decisions” to plug the UK’s fiscal black hole and wrestle inflation under control.
The result was a £55 billion package of “consolidation” in the form of tax rises and spending cuts that will squeeze the household budgets of millions over the next 12 months.
But what do five of the statement’s key announcements mean for you? Keep reading to find out.
1. Allowance reductions could see your tax bill rise
Jeremy Hunt cut the Dividend Allowance and the Capital Gains Tax (CGT) annual exempt amount. This will mean you’ll need to think carefully about the investments you hold outside of pension and ISA wrappers.
The combined effect of the measures is expected to be an additional £1.2 billion a year from April 2025. It will also lead to an increase in those completing a self-assessment tax form each year.
The allowance cuts will see:
You might want to consider redirecting investments into ISAs or pensions (where your tax-efficient investments aren’t already maxed out) and be sure to speak to us for advice.
2. The Inheritance Tax threshold freeze is extended until 2028
Rishi Sunak used his 2021 Spring Budget to freeze both the nil-rate band (£325,000) and the residence nil-rate band (£175,000) until 2026.
The latter applies if you leave your home to a child or grandchild and means that qualifying estates can pass on up to £500,000 before becoming liable for Inheritance Tax (IHT). Unused allowance can be passed to your surviving spouse or civil partner so their qualifying estate could be worth up to £1 million before IHT becomes payable.
Jeremy Hunt used his autumn statement to extend Sunak’s freeze to at least 2028. As house prices and the value of your assets rise over the next five years, the move will see more estates become liable for a charge.
Recent HMRC figures confirm that the organisation collected a record £6.1 billion in IHT for the 2021/22 tax year alone. This figure marked a 14% rise from the previous year.
We can help you to manage your estate tax-efficiently – including through gifting and making use of pension rules – so be sure to contact us if you are worried about the current freeze.
3. A cut to the additional-rate tax threshold
As a high earner, the amount of Income Tax you pay will soon increase.
Whereas the additional rate of 45% currently applies from £150,000 of annual earnings, this will drop to just £125,140. As a result, you will pay the additional rate on more of your earnings.
This move completes a U-turn from the mini-Budget, during which Kwasi Kwarteng abolished the initial rate, before quickly reinstating it.
4. The State Pension “triple lock” will be honoured
While the State Pension is unlikely to be the main source of your retirement income, it is a stable and reliable foundation on which to build.
The fate of the State Pension triple lock was a huge talking point among commentators in the run-up to the autumn statement. This was largely a result of soaring inflation, and in particular, September’s inflation figure (which is used as part of the calculation for April’s rise).
To ensure that the State Pension keeps pace with the cost of living, it rises each year by the higher of:
With the CPI for September at a then-40-year high of 10.1%, those receiving the State Pension will see a huge boost to their income next year. If you currently receive the full new State Pension, you will receive an additional £900 in 2023/24.
5. The energy price cap will rise… but be extended
Originally announced as a two-year initiative, the energy price cap is currently set at £2,500 until April 2023. This is the amount the average household can expect to pay for their energy bills for the year.
As inflation continues to soar and Russia’s invasion of Ukraine exacerbates rising fuel prices, Jeremy Hunt announced that the current cap would remain in place. It will, though, become less generous.
The cap will rise to £3,000 from April and stay at that level until April 2024.
This amounts to support of £500 on average for 2023/24 but still means that your energy bill will be considerably higher than it was last winter.
Get in touch
If you have any questions or concerns about any of the announcements made in the chancellor’s autumn statement, please contact us today.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
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