After September’s controversial mini budget, all eyes were on the new Chancellor Jeremey Hunt today.
With the economy in recession, inflation at a 40-year high, interest rates on the rise, energy bills at unprecedented levels and the cost-of-living crisis squeezing household budgets, he set out his plan to stabilise the economy.
So, what do the announcements made in the Autumn Statement mean for our personal finances?
Taxes
Income Tax is the government’s biggest source of income.
You pay the 20% basic rate of income tax on earnings above the personal allowance threshold of £12,571 and up to £50,270 a year.
The 40% higher rate of income tax is paid on earnings between £50,271 and £150,000 a year.
And the 45% additional rate of income tax is paid on any earnings above £150,000 a year.
In normal times, we’d expect those thresholds to go up every year in line with inflation, so workers don’t lose out.
But the personal allowance and higher rate thresholds had already been frozen until 2026 and today the Chancellor extended that for two more years until 2028, while also cutting the additional rate from £150,000 to £125,140.
This will drag millions more people into higher tax bands in the coming years as their wages increase.
Linda Wallace, Director of Wesleyan Financial Services, said: “Freezing the Income Tax bands is a stealth tax. Coupled with high inflation, it means people will have less in their pockets in real terms."
The freeze on Inheritance Tax was also extended from 2026 to 2028.
The 40% tax kicks in on inheritances over £325,000 and has been frozen since 2009, so it has become increasingly lucrative for the Government as house prices have increased.
Capital Gains Tax is paid on any profits over £12,300 when you sell an asset like shares or a second home.
The rate varies between 10% and 28%, depending on which tax bracket you are in and what kind of asset you are selling.
But today, the Chancellor announced that the annual allowance will be halved to £6,000 for 2023/4 and halved again to £3,000 in 2024/5.
Similarly, the £2,000 tax-free dividend allowance will be cut to £1,000 in 2023/4 and then to £500 in 2024/5.
As with Capital Gains Tax, this will mean more people will be liable to pay tax.
Linda Wallace added: “This is the sting in the tail of today’s budget. Capital gains tax allowances and dividends allowances have been slashed meaning even those making modest profits on funds in the market will feel this pinch. Making the most of ISA allowances – a crucial tax-free savings vehicle – will be important for everyone looking to minimise the impact of this change.
“It’s an issue too for those looking to sell second homes who may now find they hold off on selling to avoid higher capital gains charges.”
Energy
Energy is perhaps the biggest single concern for households at the moment.
In September, the government announced a six-month Energy Price Guarantee for homes, which meant prices would be capped at around half the current wholesale price from October to April.
But the Chancellor was under pressure to announce further measures beyond that date, and today he announced the scheme would be extended by one year, albeit at a reduced rate.
From April, the price cap will rise so the average household bill goes up from £2,500 to over £3,000.
Businesses, including schools, hospitals, GP practices and dental practices, will have to wait to see if they will receive any support after the Energy Bill Relief Scheme ends, though the Chancellor did mention a new targeted approach after April.
Alec Collie, Head of Medical at Wesleyan, said: “The cost of living is already pushing household budgets close to the edge, and today’s news will do little to help those who are struggling.
“We know that some are having to dip into their savings and pensions to cover living costs, but this should be done carefully and, if possible, with financial advice as it can have a significant impact on future retirement plans."
Electric vehicles will also be eligible for Vehicle Excise Duty from April 2025, which is currently £140.
Pensions
Many will have been disappointed not to have seen any action on the Lifetime Allowance - the limit on the amount you can save into a pension without triggering an extra tax charge.
It’s caused issues for doctors approaching the end of their careers, prompting some to reduce their hours or retire early to avoid big tax bills.
The Lifetime Allowance usually increases every year in line with inflation, but last year it was frozen until 2025.
At least the freeze wasn’t extended again, as some had predicted.
Alec Collie added: “The Government has long hinted at reforms to improve the situation and lack of action today is disappointing. Those tempted to pull out of the scheme to avoid charges should be careful as it could result in a diminished retirement pot and the loss of valuable benefits.”
The age at which people become eligible for the State Pension, which is currently 66, though it is due to rise, will also be reviewed, with the results published next year.
Look out for more Wesleyan analysis of today’s Autumn Statement, including how it will impact doctors, dentists and teachers.