At a glance:
Taxation and Income
- Income tax personal allowance and higher rate thresholds have been frozen until April 2028
- The minimum wage for people over 23 will increase from £9.50 to £10.42 an hour from next April
- State pension payments and means-tested and disability benefits will increase by 10.1%, in line with inflation
- In England, Wales and Northern Ireland, the top additional rate of income tax (45%) will now be paid on earnings over £125,140, instead of £150,000
- National Insurance and inheritance tax thresholds also to be frozen for an additional two years, (now until April 2028)
- Tax-free allowances for dividend and capital gains tax also due to be cut next year and in 2024
- Household energy price cap extended for one year beyond April but made less generous, with typical bills capped at £3,000 a year instead of £2,500
- The inflation rate for the UK is predicted to be 9.1% this year and 7.4% next year
- Unemployment expected to rise from 3.6% to 4.9% in 2024
- Scheduled public spending will be maintained until 2025, but then grow more slowly than previously expected
- In England, budget for the NHS will increase by £3.3bn a year for the next two years, and spending on schools by £2.3bn
- The lifetime cap on social care costs in England, due to come into effect in October 2023 is delayed by two years
- Social housing rent increases in England capped at 7% from next April - instead of 11% due to inflation
- Electric cars, vans and motorcycles will be liable for road tax from April 2025
Personal allowances frozen for longer
In his first Autumn budget last week, the new chancellor, Jeremy Hunt announced a plan to tackle the impact of increases to the cost of living. This included tax rises as well as spending cuts. The income tax personal allowance threshold will be frozen until 2028 instead of 2026.
"I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028," he says.
Freezing the personal allowance means that tax bands will stay the same, even as earnings increase. As wages go up, the amount of income that you pay tax on will increase, and naturally more people will be impacted by the higher rate of income tax.
How income tax level in England, Wales & Northern Ireland* will change from April
First £12,570 earned **
Frozen until 2028
£12,571 to £50,270
Frozen until 2028
£50,271 to £125,140
* Scotland sets its own bands and rates
** Reduced by £1 for every £2 earned between £100,000 and £125,140
Additional rate of income tax
The chancellor also announced that the threshold for paying the top rate of income tax is to be reduced from £150,000 to £125,140.
"Those earning £150,000 or more will pay just over £1,200 more a year," he states.
Pensions to rise by 10.1% from April
The statement also confirmed that pensions, like benefits, will rise in line with September's inflation rate of 10.1%. He confirmed that the government is sticking to its ‘triple lock’ on the state pension. This is the pledge that the state pension will rise in line with either: the previous September's inflation figure (as measured by the Consumer Prices Index), the average wage increase, or 2.5%, whichever is highest.
That will see those on the full ‘new’ state pension, currently worth £185.15 a week, see a rise of nearly £20 a week to £203.85. The basic state pension, for those who reached state pension age before April 2016, is currently £141.85 a week, and will go up to £156.20. That can be topped up for those on low incomes with pension credit, which will also go up by 10.1%.
The government's review on the age at which the state pension is received (currently 66 and going up to 67) will be published early next year.