Barely eight weeks after the disastrous ‘mini’ budget, Chancellor Jeremy Hunt has unveiled a package of tax hikes and spending cuts to mend Britain’s struggling public finances – but it is at the expense of the nation’s personal finances.
The Chancellor vowed to protect the most vulnerable and focus tax hikes on the broadest shoulders, warning that the UK economy was already in recession and things would get worse before they got better.
Here is a summary of the key actions that can affect your personal finances:
Around a quarter of a million taxpayers with incomes over £125,140 will pay the top tax rate of 45p from April next year after Hunt lowered the threshold from its existing level of £150,000.
That means people with income over £150,000 pay an additional £1,243 in income tax per year.
“We demand more from those who have more,” said the Chancellor.
He also extended freezes on other income tax and social security thresholds for a further two years to 2028, which is expected to yield tens of billions of pounds in “sham taxes” as inflation drives up workers’ wages.
Rather than increasing in line with inflation, the non-taxable personal allowance in England, Wales and Northern Ireland remains at £12,570 and the higher threshold at £50,270 (Scotland has different tax amounts).
The freeze is expected to force about 3 million people to pay higher income tax rates by 2026 analysis from the Department of Finance.
The ‘zero band’ freeze on inheritance tax is also being extended from 2025-26 to 2027-28, which could net the Treasury at least half a billion pounds.
From April 2025, electric vehicles will no longer be exempt from vehicle tax.
The Chancellor announced plans to significantly reduce tax allowances for the benefit of investors.
Capital gains tax allowances will be reduced, with the annual tax-free allowance being cut from £12,300 to £6,000 from April 2024 and then halved again to just £3,000 from April 2024.
The tax-free dividend allowance will be halved from £2,000 to £1,000 from April 2024 and to just £500 from April 2024.
This will hit investors who hold income-paying stocks outside of tax envelopes like ISAs and annuities, as well as directors of limited liability companies that are remunerated by dividends.
The triple lockdown on the state pension was maintained, meaning a 10.1 percent increase for retirees next April.
The full annual amount of the new State Pension will rise above £10,000 for the first time next year and be worth over £200 a week.
The pension credit, a benefit given to the poorest retirees, will also increase by 10.1 percent.
However, said the Chancellor a review in the current level of the statutory retirement age would be published “early 2023”.
Living Expense Payments
From next April, the current package of measures for energy bills will be aimed more specifically at low-income households.
Currently, the Energy Price Guarantee limits energy bills to £2,500 per year for the average household. From April next year this cap will rise to £3,000 and remain at that level for 12 months.
The £400 support package that all UK households receive will not be repeated, but households on means-tested benefits will receive a £900 living allowance, pensioner households will receive £300 and households with disabilities will receive £150.
The measures will be funded in part by higher windfall taxes for energy companies.
The chancellor confirmed that both means-tested benefits and the national living wage would also rise by 10.1 percent next April.
There were no changes to the stamp duty – one of the few “mini” budget measures to have survived intact.
However, the chancellor said these measures would only remain in place until March 31, 2025.
Former Chancellor Kwasi Kwarteng doubled the threshold at which stamp duty would be charged in England and Northern Ireland to £250,000.
First-time buyers were also exempt from paying tax on the first £425,000 of their purchase, up from £300,000.
Hunt said the change is now temporary and would “create an incentive to support the housing market and related jobs by encouraging transactions during the period when the economy needs it most.”
Additional reporting by George Hammond
https://www.ft.com/content/11a826bf-6cd2-410f-8d05-254ad833fb75 Fall statement: what it means for your money