Oakworth Financial Planning – Autumn Budget Statement Summary

As the UK enters a recession and inflation hits 9.1% (OBR forecast), the Chancellor stated that decisions of ‘eye-watering difficulty’ would be required in yesterday’s (17 November) Autumn Statement in a bid to combat these and stabilise the economy.

With substantial tax hikes and spending cuts expected as part of a ‘£55bn consolidation’, there was considerable anticipation about what the specifics of the Government’s ‘plan for stability, growth and public services’ would be.

We summarise all the key parts of the Statement below.

Income Tax

As expected, the personal allowance (the amount you can earn before you start paying income tax) remains at £12,570.

The amount people will have to earn before they pay income tax at 40% remains at £50,270 and will remain at this level until April 2028.

The Chancellor has reduced the amount you can earn before paying the additional rate of income tax of 45% from £150,000 to £125,140.

National Insurance

The Chancellor confirmed National Insurance contributions from 6 April 2023 will continue at their current rates. To confirm, this means:

Class 1A and 1B employers pay 13.8% on earnings over £9,100.

Class 1 employees pay 12% on their earnings between the primary threshold and the upper earnings limit; between £12,570 and £50,270.

Class 1 employees pay 2%, on their earnings above the National Insurance contributions upper earnings limit.

Corporation Tax

The Chancellor confirmed the proposed increase to 25%, planned for 1 April 2023, will take place.

Inheritance Tax

The inheritance tax threshold will be maintained at the existing level of £325,000 until April 2028.

State pension

The ‘triple lock’ will still apply to State pensions. CPI was 10.1% in September 2022 which was greater than 2.5% and the increases in earnings so the new and basic rate pension will increase by 10.1%.

This means the New State Pension for someone with a full National Insurance contribution record will increase from £185.15 per week to £203.85 per week.

The Basic State Pension for someone with a full National Insurance contribution record will increase from £141.85 per week to £156.20 week.

The age state pension is paid is legislated to increase over the next 25 years. There will be a review of this published in 2023 which will consider whether the existing timetable remains appropriate.

Lifetime allowance

The lifetime allowance remains at £1,073,100 for 2023/24.

Annual allowance

The annual allowance remains at £40,000 for 2023/24.

Money purchase annual allowance

The money purchase annual allowance remains at £4,000 for 2023/24.

Tapered annual allowance

Threshold income remains at £200,000 and adjusted income at £240,000 for 2023/24.

ISAs

The adult ISA annual subscription limit for 2023/24 will remain unchanged at £20,000.

The junior ISA annual subscription limit for 2023/24 will remain unchanged at £9,000.

Capital Gains Tax

As expected, the personal Capital Gains Annual Exempt Amount will reduce from April 2023. Initially the decrease will be £6,000 (tax year 2023/24) falling further to £3,000 in April 2024.

This £6,300 total reduction costs taxpayers £630 at basic rate (£1,134 with 8% property surcharge) and £1,260 at higher rate (£1,764 with 8% property surcharge).

The £9,300 reduction from 2024 costs £930 (£1,674 with property surcharge) and £1,860 (£2,604 with property surcharge).

Dividend Tax Allowance

This allowance will be cut from £2,000 to £1,000 in April next year, and then reduced down to £500 from April 2024.