The November 2022 budget is a package of tax rises and public spending cuts as new Chancellor Jeremy Hunt seeks to battle recession and inflation. Here’s a summary of the main announcements.
UK now in recession
The government has confirmed that the UK has entered recession. The Office for Budget Responsibility (OBR) says higher energy prices driven by the war in Ukraine are largely to blame for the downturn. It also believes the country will not start growing again until 2024.
Millions to pay more in income tax: thresholds frozen until April 2028
A decision to freeze income tax thresholds means that many people will end up paying more tax over time. Receiving a pay rise – even below current inflation rates – could push you into a higher tax bracket.
Some non-taxpayers may start paying 20% tax on a portion of their income. Even those who stay in the same tax bracket will pay more tax as their wages rise.
Higher earners to pay more in income tax
The Chancellor has also lowered the threshold for the top rate of tax. From April 2023, the 45% income tax rate will apply to anyone earning £125,140 – a reduction from the current level of £150,000.
Those earning £150,000 or more will now pay a little over £1,200 more a year.
Benefits and state pension to rise by 10.1% from April 2023
A 10.1% increase to pension and benefit payments means that over 12 million pensioners will see their state pension rise by £18.70 a week from April next year, A single person aged 25+ on universal credit will see their benefits increase by £33.83 a month.
Chancellor Jeremy Hunt confirmed that the government will retain the state pension triple lock.
New £900 cost of living payment announced
A new £900 cost of living payment will be paid to those who need it most. The new payment will be means-tested and paid in two instalments.
This adds to previous cost of living payments worth £650 which have already been paid to millions on certain benefits, with a further £150 paid in 2022 to those on certain disability benefits.
Domestic energy bills to reach £3,000 per year
Help with energy costs has been extended for all households, but at a less generous level. The protected bill for a typical household will rise from the current £2,500 to £3,000 in April.
Without government help, average bills would have gone up to about £3,740, analysts suggest.
National living wage to increase
Jeremy Hunt says he has accepted a recommendation to increase the national living wage by 9.7 per cent. This means the hourly rate will be £10.42 from April 2023.
Stamp duty cuts announced in the mini-Budget will remain in place, but only until March 31, 2025.
The aim behind this is to encourage banks to be more flexible around mortgages and keep the housing market stable.
Windfall taxes will raise £14bn, including a new temporary 45% levy on electricity producers.
An almost £14bn tax cut on business rates will benefit about 700,000 businesses.
Employment allowance will be retained at a higher level of £5,000.
The government will focus on economic growth, despite having to find budget savings. Energy, infrastructure and innovation will be priorities. Investment in energy efficiency for homes and industry by will be doubled by £6bn from 2025.
Need more clarity about what the Budget means for you or your company? As small business accountants in Peterborough, we provide tax advice, payroll services and much more. We’re pleased to help, so contact us on 07842 507362 or 01733 325852.