Another month and another Chancellor related update for you. This time from Jeremy Hunt.
It’s fair to say that this statement took a completely different tone to the one from the previous chancellor, Kwasi Kwarteng, only a couple of months ago.
Not only have the majority of the tax cuts previously announced been cancelled, but a considerable amount of tax rises are being introduced.
This is a reaction to a gap in the public finances and a desire to be seen as credible custodians of the public’s finances. Especially after the rather negative response to the previous regime from “the markets”, and that’s putting it mildly.
To be fair to Hunt, the markets have reacted well since he got the job and there has been somewhat of a recovery in the value of the pound and a reduction in the cost of government borrowing.
There was a fair amount to unpick in the statement, and the below will focus on what we think is relevant for our clients and will inform some of the planning and advice we carry out with you.
State Pensions & Benefits
- The state pension, along with means-tested and disability benefits, will each rise by 10.1% in April 2023. For example, the standard full flat rate state pension will be going up from £9,628pa to £10,600pa
- The long-delayed lifetime cap on social care costs of £86,000, previously due to be introduced in October 2023, has been pushed back by another two years.
- The government’s Energy Price Guarantee will be made less generous from April 2023. A typical household will pay £3,000 per year for energy from then on, up from £2,500 currently.
- Additional support of £900 will be made available for households dependent on means-tested benefits; £300 will go to pensioners receiving the Winter Fuel Payment; and £150 for those in receipt of disability benefits
- To help fund this, the windfall tax on the profits of oil and gas firms has been increased from 25% to 35% and extended until March 2028. Electricity generators face a new 45% tax
- No support for business energy bills is pencilled in beyond April at present
- The earnings threshold for the 45% additional rate of income tax will be lowered, from £150,000 per annum to £125,140. The Scottish Government sets its own income tax rates, and they will be setting out their plans on the 15th December.
- Key thresholds for other income tax bands, National Insurance and inheritance tax all frozen until April 2028
- Dividend allowance to be cut from £2,000 to £1,000 in April, then reduced again to £500 in April 2024
- Capital Gains Tax allowance to be cut from £12,300 to £6,000 in April, then reduced again to £3,000 in April 2024
- Corporation Tax for businesses will increase to 25% for profits over £250,000. For profits below £50,000 it will remain at 19%, with a tapered rate in between.
We understand that there’s a fair amount to take in. But as your financial planners, we are here to support you and help you make proactive decisions and update your financial plans accordingly. Naturally, should you want to talk this through with us please get in touch. Call us on 0117 942 4333.
The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.