Autumn Statement 2022: What it means for your money

What you need to know about the Government’s latest spending and taxation plans.

With the longest recession since records began forecast, Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are set to usher in a new era of austerity (if the last one ever really ended).

Announcements made as part of the Autumn Statment (effectively a Budget in all but name) on Thursday 17 November 2022 by Hunt mean we’ll all be paying more tax in the coming years.

Here are those key changes, and what impact they could have on you and your money.

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Energy bills

Energy cap to go up to £3,000 a year

As already announced, the Energy Price Guarantee of £2,500 bills (on average) will end in March 2023 after six months, rather than the initial two years.

However rather than be scrapped completely and revert to quarterly changing price caps, the EPG will stay, and move to £3,000 a year for 12 months.

Though it’s an increase, it’s predicted actual costs will increase to around £3,700 in April. So effectively this will save money for every household – subsidised by the government.

But you’ve also got to take into account the end of the £400 support we’re all currently getting. So really average bills will jump by an effective 43%.

Remember, the cap is based on individual energy units, not your total bill. So if you use more than average then your bill will be higher than £3,000 a year. And the opposite is true if you use less than average.

Extra support extended for some

As mentioned, we won’t see the universal £400 discount applied to every bill as we have right now (£67 off each one running October 2022 to March 2023). Instead targeted support will be provided to people on low incomes, such as those receiving benefits and pensioners.

This is similar to the other parts of the Energy Support Scheme announced in the summer. The new support will see a £900 cost of living payment for those on things like universal credit and tax credit (up from £650),

There will also be another £300 for those getting the State Pension and £150 for those receiving disability payments. And there’s also an increase from £100 to £200 for the payment to support those using non-traditional fuels like oil and LPG.

Windfall tax extended

The Conservatives were strongly opposed to any windfall tax on energy firms – at least in name. The one announced in May when Sunak was Chancellor was called an “energy profits levy”. It was also pretty watered down from what Labour was calling for as it allowed firms to invest in further fossil fuel extraction to avoid paying the extra tax.

But Hunt has extended this policy – and even said he didn’t have a problem with windfall taxes (as long as they were temporary. It’ll be increased from 25% of profits on oil and gas to 35% and will last until 2028, two years longer than initially planned. There will also be a new 40% tax on profits from wind and solar farms and nuclear plants.

Personal Tax

There aren’t any direct increases in tax rates we all pay on our salaries and income, but that doesn’t mean we won’t pay more actual tax. There are instead a number are “stealth” hikes that mean we’ll hit the thresholds where we pay more sooner.

More to pay Additional rate of income tax

This is a huge turnaround from September’s mini-Budget when the additional rate of tax was abolished. First the u-turn reinstated it, and now the threshold is lowered from its current £150,000 a year level.

It means from 6 April 2023, those earning more than £125,140 a year (in England, Wales and Northern Ireland) will pay 45% tax on these extra earnings (remember, it’s tiered, so they won’t pay this on the full salary).

This has been estimated as an average £580 extra in tax each year for around 250,000 people who pay this for the first time, while those already earning above £125,140 will pay £1,250 extra each year.

Those moving into this tax threshold will also lose the personal savings allowance on interest earned through savings. That means they’ll be paying 45% tax on all interest held outside an ISA.

Other income tax thresholds frozen

The rest of us won’t see an obvious hike in the tax we pay on wages, we will eventually be paying more thanks to the freezing of the other income tax thresholds. Usually these increase with inflation, so if you get a pay rise linked to inflation, you’ll not be penalised (give or take).

These were due to be frozen until 2024 (again in England, Wales and Northern Ireland), but that’ll now extend until 2028. So for the next five and a half years, any pay rise you get will push you towards and potentially into the higher tax brackets.

• Basic rate: £12,570
• Higher rate: £52,270
• Additional rate: £125,170

Council Tax could get higher

There’s been a rule in place preventing Councils from increasing Council Tax by more than 3% each year – unless they got approval via public referendum. They can now hike what we pay by up to 5% more each year before needing public approval (actually 3%, plus 2% more if they pay for social care). Expect most Councils to implement this next spring.

Other tax

Stamp Duty change to be reversed in 2025

One of the few remaining policies from the mini-Budget was increases to thresholds on Stamp Duty. This will now revert to the previous levels from 1 April 2025.

Dividend tax and capital gains tax allowances reduced

We already knew that Dividend Tax would increase by 1.25% from April onwards (despite Truss and Kwarteng attempting to change this).

On top of this there will also be a cut of the tax-free allowance from £2,000 to £1,000 from April 2023 onwards, then down to £500 a year later.

The capital gains tax allowance will also be reduced in the spring. It’ll drop from £12,300 a year to £6,000. Then in the following April of 2024 halve to £3,000.

This highlights the importance of using ISAs for investments to protect any gains you make. And though this isn’t my area of expertise, it could if you have assets that have grown in value (such as buy-to-let homes) you might want to sell them off before the CGT threshold changes.

Inheritance tax threshold frozen

This won’t really impact many people as not many people pay it.

No pension tax changes

Rumoured cuts to Pension Tax Relief didn’t happen – although that doesn’t mean it won’t in the future. And the lifetime allowance didn’t move upwards, so that could impact how much the highest earners can save.

Electric vehicles will be taxed

From April 2025 electric vehicles will no longer be exempt from Vehicle Excise Duty. For new cars (from year two) and ones registered since 2017, this will be the standard rate (currently £165 a year).

Wages and benefits

State Pension & benefits to increase with inflation

There’s been constant speculation that these payments wouldn’t keep up with rising costs, but it was confirmed today that both will increase next April by September’s inflation rate of 10.1%

The benefits cap will also raise by the same amount, though as a one-off.

Minimum wage up

Though still well below the rate that would offer a true living wage (currently set at £10.90 outside London and £11.95 in London), there will be an increase for over 23’s from £9.50 an hour to £10.42. That’s worth £1,600 over a year if you’re a full time worker.