The Chancellor, Jeremy Hunt, was faced with a challenging economic backdrop to his first major set piece, grappling with a combination of over 11% inflation, an official recession and the need to calm markets and re-establish the UK’s financial credibility following the turmoil of September’s ‘mini-Budget’.
Mr Hunt’s position was not an enviable one. His long-term focus is on stability, growth and public services. Most of the attention, however, centres on the balance he attempted to strike between tax increases (both real and stealth) and spending cuts to fill the over £50 billion deficit he has inherited. The key announcements covered a wide range of ground:
• Income tax and national insurance allowances and thresholds along with the IHT nil rate band will remain frozen at their current levels for an extra two years until April 2028;
• The threshold for the 45% additional rate of income tax will reduce from £150,000 to £125,140 from April 2023;
• The dividend tax free allowance will reduce from £2,000 to £1,000 from April 2023 and be halved again to £500 from April 2024;
• The capital gains annual exempt amount will be cut from £12,300 to £6,000 from April 2023 and halved to £3,000 from April 2024;
• From April 2023 the energy price guarantee will be adjusted upwards, costing typical households an additional £500 from the current position;
• State pensions will increase under the ‘triple lock’ in line with the 10.1% September CPI inflation figure, alongside universal credit and certain other benefits;
• Business rates will be updated with additional targeted support over the next five years;
• The benefit-in-kind percentages for electric cars will increase by one percentage point each year up to a maximum percentage of 5% by 2027/28. Electric cars will also be liable for road tax from April 2025; and
• Research and development tax reliefs for Small & Medium Enterprises will be reduced from April 2023. The qualifying expenditure deduction will reduce from 130% to 86% and the tax credit rate will decrease from 14.5% to 10%.
If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the above, please contact us to discuss them.