Autumn statement: Jeremy Hunt's budget will see millions paying more in tax and energy bills to rise to £3k
Millions will pay more as Chancellor Jeremy Hunt has announced an extended freeze on tax thresholds as part of his Autumn statement.
Hunt also confirmed that pensions – like benefits – will rise in line with September's inflation rate of 10.1%.
He says that as a result the government is sticking to its “triple lock” on the state pension.
That refers to a manifesto pledge that the state pension would rise in line with the highest of: the previous September's inflation figure, the average wage increase, or 2.5%.
The threshold for the top rate of income tax, 45%, will come down from £150,000 to £125,140.
Those earning £150,000 or more will pay just over £1,200 more a year. An extra 232,000 people will be paying the top rate of income tax from April, according to Treasury figures.
Allowances and thresholds for income tax, national insurance and inheritance tax will be frozen for a further two years, going up to April 2028.
Read more: Stamp duty cut will end in 2025 Jeremy Hunt reveals in Autumn statement
Freezing income tax bands will drag an extra six million people into paying more tax, according to the OBR, raising £26bn a year by 2028.
Energy price guarantee to increase
Hunt also said the energy price guarantee scheme will increase from £2,500 for the average household to £3,000 for 12 months from April.
There will be targeted support with the cost of living for those on low incomes, disability and pensioners.
Hunt said: "This winter, we will stick with the plan to spend £55bn to help households and businesses with their energy bills – one of the largest support plans in Europe.
From April, we will continue the Energy Price Guarantee for a further 12 months at a higher level of £3000 per year for the average household. With prices forecast to remain elevated through next year, this will still mean an average of £500 support for every household."
Employer national insurance threshold frozen
While the Employers National Insurance Contributions threshold is frozen until April 2028, the Employment Allowance will be retained at its new, higher level of £5,000 until March 2026.
Read more: Bank of England: Bailey warns further interest rate rises likely
The freezing of tax brackets is known as a stealth tax as more people are pulled into paying higher tax as wages and prices rise.
Hunt went on: “We are also taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”
He said he would also reform allowances on unearned income, noting: “The dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024.
“The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024. These changes still leave us with more generous allowances overall than countries like Germany, Ireland, France, and Canada.”
Windfall tax increases to 35%
Hunt has confirmed that the energy industry will be hit with an expanded windfall tax of 35% up from 25% from 1 January until March 2028.
"I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices," he says.
"But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses."
He will also introduce a temporary 45% levy on electricity generators. He says together these taxes will raise £14bn next year.
Read more: Inflation hits 41-year high of 11.1% on the back of energy and food price hikes
Business rate revaluations to go ahead
On business rates, Jeremy Hunt said bills should “accurately reflect market values so we will proceed with the revaluation of business properties from April 2023”.
£55bn 'consolidation' in @Jeremy_Hunt autumn statement. That's cuts and tax rises in most people's language. Roughly half from higher taxes, half from reducing budgets. #AutumnStatement
— @petermacmahon (@petermacmahon) November 17, 2022
He added: “But I will soften the blow on businesses with a nearly £14 billion tax cut over the next five years. Nearly two-thirds of properties will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit.”
The Treasury also pledged to increase rates relief for retail, hospitality and leisure firms from 50% to 75% for 2023 to 2024.
While the relief is capped at £110,000 per businesses, the Government said that around 230,000 business properties are set to get a £2.1bn tax cut next year.
Furthermore, many high-street retailers who have seen the value of their property rents tumble in recent years will benefit from a move to revalue business rates.
The government said it would be removing the downwards cap – meaning businesses who see falling business rates bills as a result of revaluation will benefit from the decrease straight away.
Robert Hayton, the UK president of real estate adviser Altus Group, praised the autumn statement as a “budget for the embattled high street” that has listened to and acted upon the concerns voiced by retailers.
He said: “This is a budget for the embattled high street where rents have been in decline for a number of years.
Read more: From income tax to pensions: What Jeremy Hunt's Autumn statement means for you
“Next April will now level up regions and sectors which have fared badly whilst protecting those against exceptionally large increases in tax liabilities.
“The next part of the puzzle could come as early next week with the publication of new draft rateable values and then businesses will know exactly their rates bills for next year.”
Total business rates paid by the retail sector is estimated to fall by a fifth, the Government said.
The British Retail Consortium (BRC) – which works with more than 5,000 business members – also welcomed the new measures, which will prevent many retailers from overpaying rates bills.
The BRC’s chief executive, Helen Dickinson, said: “The announcements today show the Government has heard the concerns of the retail industry.
“This autumn statement supports retailers by reducing upwards pressure on prices in the short term, and helping retailers protect jobs, keep shops open, and protect the vibrancy of local communities.”
While industry groups welcomed the package of support, some urged the Government to consider deeper, structural change to the business rates system as many businesses face crippling costs during the winter.
Electric vehicles to no longer be exempt from road tax
In other measures, Hunt announced electric vehicles will no longer be exempt from vehicle excise duty from April 2025 to make the system "fairer”. He is accepting a recommendation from the Low Pay Commission and increasing the national living wage by 9.7% next year.
"That means from April 23, the hourly rate will be £10.42 which represents an annual pay rise worth over £1,600 pounds to a full time worker," he said.
The health of a nation is vital. The government is making available:
✅Up to £2.8bn in 23-24 & £4.7 billion in 24-25 for Adult Social Care, to help the most vulnerable.
✅£3.3bn in 23-24 & a further £3.3bn in 24-25 to improve the performance of the NHS #AutumnStatement pic.twitter.com/OUJ23GkYXI
— HM Treasury (@hmtreasury) November 17, 2022
Hunt did pull some rabbits out of his hat, including investing an extra £2.4bn per year on schools and increased the NHS budget by £3.3bn. Adult social care will get £1bn more next year and £1.7bn in 2024.
Social housing rents will have their increases capped at a maximum of 7% in 2023-24, he added.
The total amount of savings from the autumn statement has been costed at £55bn, through raising taxes and cutting government spending.
Watch: Autumn Budget: Jeremy Hunt announces UK now in recession