Chancellor: no “easy answers” as Britain enters a recession17/11/2022
The UK’s fourth Chancellor of the Exchequer this year, Jeremy Hunt, has unveiled his Autumn budget. Prominent in Mr. Hunt’s announcement was the admission that the UK was now in a recession and that its economy would not recover to pre-Covid levels until at least 2024. As a result, the Chancellor has taken a number of actions designed to protect British businesses and people, from confirming the pension triple lock to lowering the threshold for the highest tax rate and unveiling a massive business rates relief package. Below, we run through the most important parts of the Autumn Budget:
A new approach to taxation: hikes on high earners, frozen NI allowances, and more…
The Chancellor outlined a number of changes to tax designed to raise funds for the Exchequer. He stated that he will raise taxes on the wealthiest individuals by lowering the 45p income tax threshold from £150,000 to £125,140. The tax-free allowance and the 40p level on income tax will be fixed until April 2028, raising billions of pounds. National Insurance and inheritance tax thresholds will be maintained for the same period in order to earn additional funds for the government. The chancellor also stated that the dividend limit will be reduced from £2,000 to £1,000 next year, and then to £500 beginning in April 2024. The yearly capital gains exemption will be lowered from £12,300 to £6,000 next year, then to £3,000 in April 2024. Mr. Hunt pointed out that even after these changes, the UK will still have “the most generous set of tax allowances of any G7 country”.
A £13.6 billion business rates relief package
Mr. Hunt has launched a £13.6 billion business rates relief package to offset the levy increase that will affect hundreds of thousands of businesses in April of next year. According to Hunt, the five-year interim relief programme means that two-thirds of properties will not have to pay any additional business rates next year. Based on September’s CPI inflation figure of 10.1%, the Treasury was expecting a £3 billion windfall from businesses from the annual increase in business rates payments.
Stamp duty cuts will remain until at least 2025
Stamp duty reduction imposed by former chancellor Kwasi Kwarteng will remain in effect for the time being, but will be phased out by March 2025, according to Jeremy Hunt. Kwarteng raised the stamp duty threshold in England and Northern Ireland from £50,000 to £250,000. First-time buyers are no longer needed to pay tax on the first £425,000 of their purchase, up from £300,000. Hunt stated that the modification will now be only temporary, creating “an incentive to support the housing market and the jobs associated with it by boosting transactions during the period the economy most needs it”.
Electric vehicle tax exemptions to end (but company cars will still be beneficial)
Electric vehicle owners will be required to pay car tax beginning in 2025, in an effort to offset declining income from the slow decline of petrol and diesel vehicles ahead of a sales phaseout at the end of the decade. Electric vehicles benefit from a variety of financial perks, including no fuel duty, no car tax, and preferential status under company car plans. In Thursday’s budget, Hunt outlined plans to phase off such benefits, with electric vehicle exemption from Vehicle Excise Duty ending in April 2025. Although the plug-in car subsidy, which provided motorists with up to £5,000 off the cost of a new electric car, has been phased out, the most significant incentive remains company car tax treatment, which has resulted in widespread adoption among fleets. However, Mr. Hunt added that company car tax rates “will remain lower for electric vehicles” and that he will limit the rate increase to 1% a year for three years starting in 2025.
Increase to minimum wage
The Chancellor has accepted the recommendations from the Low Pay Commission to increase the National Minimum Wage next year by 9.7%. He said “that means, from April 2023, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 to a full-time worker”.
Continued energy support
Chancellor Jeremy Hunt stated that the government will continue to invest £55 billion on the energy assistance package to help struggling homes and companies. Hunt praised former Prime Minister Liz Truss and former chancellor Kwasi Kwarteng for their efforts in this area, saying that the government will extend the energy price guarantee for an extra 12 months, at a higher level of £3,000 per year for the typical household, beginning in April next year. Mr. Hunt stated those on means-tested benefits would get £900 in cost-of-living payments, senior households would receive £300, and disabled people would receive £150.
If you would like to discuss how the measures announced in the Autumn budget will impact you or your business, call JW Hinks on 0121 456 0190. Our friendly team of experts can help you to ensure that you are meeting your regulatory obligations without paying more than you need to.