Just 34 days into his role as Chancellor of the Exchequer, Jeremy Hunt delivered his first Autumn Statement on 17 November, after a disastrous ‘mini-budget’ by his predecessor Kwasi Kwarteng.
Hunt made the Statement against the backdrop of a £55 billion “hole” in public finances – one that needed to be filled with tax hikes and spending cuts if the Government wanted to have borrowing decrease as a percentage of GDP in the near future.
Here are the highlights of the Autumn Statement that you need to know.
Economic outlook
Hunt began the Statement with an overview of the economy as reported by the Office for Budget Responsibility (OBR).
According to the department, the economy will have grown by 4.2% in 2022 but is currently in recession and will be next year. In 2023, the economy is projected to contract in all by 1.4%, the OBR said.
However, it added:
“Without the energy price guarantee and other measures, the recession would be 1.1 percentage points deeper.”
In 2024, GDP will rise by 1.3% and return to its pre-pandemic level. Following that, growth is estimated to be 2.6% and 2.7% in 2025 and 2026.
Inflation, meanwhile, has already peaked at 11.1%, according to the OBR. It will fall sharply in 2023 and float below zero by the middle of the decade before returning to 2% by 2027.
However, high inflation will have reduced wages and living standards by 7% in the two financial years to 2023/24, wiping out the last eight years of growth.
Personal announcements
Hunt then turned to personal taxation. First was an announcement that the additional-rate tax threshold would be lowered from £150,000 to £125,140 from April 2023 to boost tax receipts. The move raises taxes for around 250,000 more people.
Meanwhile, the capital gains tax allowance will be cut from £12,300 to £6,000 for the 2023/24 tax year. In 2024/25, the allowance will be cut again to £3,000.
Likewise, the tax-free dividend allowance will be slashed from £2,000 to £1,000 in April. In 2024/25, it will then be halved to just £500.
Hunt also announced several tax threshold freezes, which will capture more individuals’ income in tax when their pay eventually increases with inflation. These include:
- income tax – frozen at £12,570 until 2028
- national insurance – frozen at £12,570 until 2028
- inheritance tax – frozen at £325,000 until 2028.
Business announcements
Businesses awaiting a reform to business rates were left disappointed after Hunt announced a revaluation of rates would take place in April 2023. However, the Government hopes to soften the blow of higher rates through a package of rates relief and support, including:
- a freeze to multipliers at 49.9p and 51.2p
- an increase to the relief available to retail, hospitality and leisure from 50% to 75%
- transactional relief to place upwards caps on increases
- a cap on increases at £600 for certain small businesses.
Hunt also unveiled a major change to the R&D relief scheme. First, the value of the relief scheme for small businesses is decreasing, as the additional deduction for the SME R&D relief scheme will decrease from 130% to 86%, while the SME credit rate will decrease from 14.5% to 10%.
Meanwhile, the R&D expenditure credit will increase from 13% to 20%, which the Treasury explained as a “rebalancing” of the two schemes and a way of addressing fraudulent claims in the SME scheme.
Talk to us about your business and how the Autumn Statement will affect you.