With every Autumn Statement comes a new spate of changes affecting the British public’s finances.
As well as announcing the UK is officially in recession, Chancellor of the Exchequer Jeremy Hunt said he must take ‘difficult decisions to tackle inflation and keep mortgage rates down’, which includes more tax and higher bills for millions of people, to claw back £24bn for the Treasury.
Below we outline the key announcements made in the Autumn Statement and what it means for your personal finances.
Income tax
The Chancellor is freezing the income tax personal allowance at £12,570 until April 2028. The higher tax rate threshold is also being frozen for the same period.
These changes mean millions of workers in the UK will pay more in tax as their wages increase.
For example, if you earned £30,000 a year and your salary increased to £33,000 in the next two years, at the basic tax rate of 20% you’d be liable for an extra £600 of tax per year at the current, frozen threshold.
However if your personal allowance also increased, say to £12,800, during the same period you would only pay an additional £370 in tax per year.
Other tax changes will affect the UK's higher earners. They will now pay the 45p rate of tax on earnings of £125,140 instead of £150,000 from April 2023.
Mr Hunt said this would cost this group of workers an extra £1,200 a year.
Since 2017/2018 the Scottish government has set its own income tax rates, rather than Westminster, so the announced changes will not apply to people in Scotland. However similar changes could be introduced, according to political commentators.
Claro Wellbeing’s financial coach Mike Barrow says: ‘Freezing tax thresholds is a little stealthy way for the Government to increase future tax income without actually changing anything - it’s known as ‘fiscal drag’.
‘Really, as inflation and average wages increase, so too should income tax thresholds so that people pay the same real terms level of tax. Freezing them just means that everyone will pay more tax as they earn more over time. Some may go over the thresholds in the future into a new tax bracket which may not have been the case if thresholds kept pace.’
Energy bills
The current energy price guarantee scheme will continue throughout winter, capping the average energy bill to £2,500 a year. However from April 2023, this will rise to £3,000.
The scheme was due to end in April but will now continue beyond, with the maximum amount suppliers can charge increasing by 20%.
However households will see their bills actually rise by 43% as the £400 energy rebate paid to most homes in England, Scotland and Wales this winter will not continue.
In Scotland is replacing the Cold Weather Payment (CWP), delivered by the Department for Work and Pensions, with a new winter heating payment. This will offer around 400,000 low-income families, currently eligible for the CWP, a £50 payment once a year. Payments for this winter are expected to be made from February 2023. Those eligible will receive a letter from Social Security Scotland before they make the payment.
The most vulnerable households will be entitled to similar package of support next year as this year. This includes a £900 Cost of Living Payment to households on means-tested benefits (up from £650 this year), a £300 payment made to to pensioner households and £150 to people on disability benefits will continue.
If you’re struggling, speak to your energy supplier to find out what support you could be eligible for. Some firms, such as British Gas, also offer grants to non-customers who may be experiencing financial hardship.
Council tax
Most councils in England will be able to push up tax by 5% without holding a local referendum. If all councils do this, it could push up the average annual bill to more than £2,000.
Previously, the public were asked to vote if their council had plans to increase taxes by more than 2%, plus a 1% increase to fund social care.
The changes mean families in some of the most expensive council tax areas could see their council tax bills rise by more than £100 a year.
For example, in Nottingham, which has the highest rate of council tax in the country, someone living in a Band D home could have to pay £114.71 more taking their annual bill to £2,408.85.
The 32 local authorities in Scotland set their 2022/23 council tax rates back in March - with 22 agreeing a 3% rise.
Stamp duty
The short-lived former chancellor Kwasi Kwarteng announced a permanent stamp duty cut in September’s mini-budget. This promised no tax would be paid on properties that cost £250,000 or less in England and Northern Ireland.
However Mr Hunt said this will now be reversed on 31 March, 2025.
The £250,000 threshold will be reduced to £125,000, meaning buyers will need to pay 5% above this. For example, a £250,000 property, which would have been free of stamp duty before the u-turn, now attracts stamp duty tax of £6,250.
The threshold at which first-time buyers have to pay stamp duty will be cut from £425,000 to £300,000.
The maximum purchase price for which First Time Buyers’ Relief can be claimed will also be slashed from £650,000 to £500,000.
Scotland has its own equivalent to stamp duty called the land and buildings transaction tax that is not affected by the Autumn Statement announcement.
Mike says: ‘This announcement is not particularly surprising since the changes in the mini budget were quite generous and they need to generate tax income somehow.
‘But the return to the original stamp duty rates in three years time are also a bit of a stealth tax - these thresholds should really be keeping pace too.
‘I expect this will lead to a drop in housing demand and potentially property prices at the time but we cannot predict what will happen in three months, let alone almost three years. It could mean good news for buyers and sellers until that time, as these stamp duty cuts essentially now have an expiry date and people will be keen to move beforehand if they can.’
Dividends and capital gains
Investors, entrepreneurs and company directors who receive dividend payments - shares of profits paid out by companies to shareholders - will also pay more in tax next year.
The dividend allowance will be halved from £2,000 to £1,000 in 2023, and cut again to £500 from April 2024. If your dividend payments breach these thresholds, you’ll pay tax on what remains based on the other income you receive.
The tax-free allowance for capital gains, which is paid on the profits made on the sale of assets such as shares or second homes, will also be cut from £12,300 to £6,000 next year. It’ll be halved again to £3,000 from April 2024. Capital gains tax is calculated in Scotland using the UK tax thresholds so the changes will apply north of the border.
If you’re a basic rate taxpayer, the capital gains tax you pay depends on a number of factors, such as how much profit you’ve made on the sale, the asset and your taxable income. If you’re a higher or additional rate taxpayer you’ll pay 28% on gains from a residential property and 20% on gains from other assets outside the exempt amount.
Any changes to tax rates in Scotland will be announced in the Scottish Budget on December 15.
National Living Wage, benefits and pensions
The National Living Wage will increase £9.50 an hour to £10.42 an hour - a 9.7% rise. This will benefit around two million people and boost the income of a full-time worker by £1,600 over a year.
Campaign group Living Wage Scotland says the "real living wage" is £10.90 - based on what employees need to earn for a decent standard of living - which has been introduced by some employers in Scotland.
Benefits will rise by 10.1% from April 2023 for 10 million households in the UK.
The State Pension will also increase rise by 10.1% to £203.85 a week as the 'triple lock' is guaranteed from April 2023. This applies across the whole of the UK.
Amelia Murray
