Wealth Management

Wealth Management Insight - Autumn Statement special

The Chancellor of the Exchequer, Jeremy Hunt delivered the 2022 Autumn Statement on Thursday 17 November.

Here we provide some context about the Autumn Statement and details of actions that you may wish to consider.

24th November 2022

Autumn Statement

Given Jeremy Hunt is the fourth chancellor in less than twelve months and with less than two months since the Kwasi Kwarteng / Liz Truss ‘growth plan,’ there was a degree of anticipation. The backdrop to the statement was war in Ukraine, increasing energy prices and cost-of-living challenges. There had been significant speculation of the need for ‘tax rises for all’ and a return to austerity for spending cuts to fill a £50 billion black hole in public finances.

Stock markets and government gilts reacted badly to the unfunded tax cuts in the growth plan in September so the absence of reaction to the autumn statement, with Sterling, stock markets and government gilts seeing little movement, was seen as a positive sign.

With one eye on a general election which will be by the beginning of 2025 at the latest, the statement was carefully managed, with a focus on ‘stealth’ taxes and the further freezing of tax bands for basic and higher rate income tax, as well as for National Insurance and Inheritance Tax. For the last few years with Rishi Sunak as Chancellor and now Prime Minister, stealth taxes have been the way forward. You can see why with no headline increase in the tax rate it is much less politically sensitive for the majority of the general public.

But stealth taxes are not new. There has been talk about the 60% rate of tax in the media this year which occurs for those with income between £100,000 and £125,140 where income tax is 40% but the personal allowance is taken away which means an effective rate of tax of 60%. This was in fact introduced by Alistair Darling in 2009 and the threshold has remained at £100,000 since then. It is estimated that the number of people falling into this income band may have tripled over the subsequent years.

There were other measures aimed at higher earners with a reduction in the additional 45% income tax threshold to £125,140 from £150,000 along with some changes to tax allowances for investments – a reduction in the capital gains tax and dividend tax free allowances from next April.

To help with the rising cost of living, the triple lock for pensioners and state benefits in general will all increase with inflation meaning a 10.1% increase in April 2023.

Spending cuts have largely been scheduled for several years’ time, to allow for changes in some of the external factors to potentially change – the war in Ukraine, a slowing of inflation and the result of the next UK General election.

Fortunately, there have been no immediate tax changes and therefore normal tax year end planning at the beginning of next year will be even more important ahead of increasing levels of taxation from next April.

Actions to consider

We have asked our experts to comment on the statement and specifically any actions they think are appropriate and also their thoughts on how finances can generally be structured tax efficiently. This includes both actions you can take now to maximise your allowances and also actions to mitigate the impact of some of the changes we expect to see in the next few years. We have included planning for all ages, and whilst some of the points may not be relevant for you, they may be of interest to help younger family members so please feel free to share this with them.

The burden of taxation is increasing and in the face of a cost-of-living crisis, any tax saved we are sure will be very welcomed. The list is not exhaustive, and we would urge you take advice before acting on any of the points raised.

If you would like to discuss your individual circumstances, please contact your Old Mill financial planner or contact us by clicking here.