On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.
Highlights
Frozen thresholds
The Chancellor announced that both the income tax personal allowance and higher rate thresholds will be frozen for a further two years until April 2028. In addition, basic national insurance and inheritance tax (IHT) thresholds have also been frozen until April 2028.
The threshold for the top 45% additional rate of income tax was cut to £125,140 from £150,000.
The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024, while the capital gains tax (CGT) exemption will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.
Fair solutions
The Chancellor announced that both the income tax personal allowance and higher rate thresholds will be frozen for a further two years until April 2028. In addition, basic national insurance and inheritance tax (IHT) thresholds have also been frozen until April 2028.
The threshold for the top 45% additional rate of income tax was cut to £125,140 from £150,000.
The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and £500 from April 2024, while the capital gains tax (CGT) exemption will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.
Energy prices
As well as increasing the personal tax burden, the Chancellor also increased the windfall tax on the profits of oil and gas firms. This was increased from 25% to 35% and extended until March 2028.
There will also be a new ‘temporary’ tax on companies that generate electricity, which will apply from January.
As energy prices continue to drive inflation, the Chancellor confirmed that the Energy Price Guarantee will be extended for a year from April 2023. However, the level at which typical bills are capped will increase to £3,000 a year from £2,500.
Business rates support
The Chancellor also announced a £13.6 billion package of support for business rates payers in England. To protect businesses from rising inflation, the multiplier will be frozen in 2023/24, while relief for 230,000 businesses in the retail, hospitality and leisure sectors was also increased from 50% to 75% for 2023.
Falling living standards
As the Chancellor finished his statement the Office for Budget Responsibility (OBR) published a grim forecast for the UK economy.
The OBR says that despite the new support with energy bills, living standards are going to fall by 7% over the next two years, which will wipe out eight years of growth.
It said that while the Chancellor’s fiscal support over the next two years cushions the blow of higher energy prices the economy will still fall into recession.
For further information, please visit the following links:
- Income tax – Changes to rates, allowances and dividends.
- National Insurance contributions – Changes to the Health and Social Care Levy.
- Capital taxes – Capital gains tax, inheritance tax and property taxes.
- Business – Corporation tax, capital allowances, Research and Development, SEIS, CSOP, VAT and company vehicles.
- Welfare, work and pensions – Cost of living payments, benefits and National Living Wage.
- Energy – Energy Profits Levy and Energy Price Guarantee.
Need help? Get in touch
If you would like more detailed, one-to-one advice on any of the issues raised in the Chancellor’s Spring Statement, please do get in touch with our team. Call us on 01904 655202, or email our tax team:
Paul Morris: paul.morris@hghyork.co.uk
Kelsey Butterfield: Kelsey.butterfield@hghyork.co.uk
