Barely eight weeks since the disastrous “mini” Budget, chancellor Jeremy Hunt has delivered a package of tax rises and spending cuts designed to repair Britain’s battered public finances — but it comes at a cost to the nation’s personal finances.
Promising to protect the vulnerable and concentrate tax rises on those with the broadest shoulders, the chancellor warned the UK economy had already entered recession, and that things would get worse before they improved.
Here is a summary of the key measures likely to affect your own personal finances:
Around a quarter of a million taxpayers with an income above £125,140 will pay the 45p top rate of tax from next April, after Hunt lowered the threshold from its existing level of £150,000.
This means people with an income above £150,000 will pay an extra £1,243 in income tax per year.
“We are asking more from those who have more,” the chancellor said.
He also extended the freeze in other income tax and national insurance thresholds for a further two years until 2028, which is expected to raise tens of billions of pounds in “stealth taxes” as inflation pushes up workers’ pay.
Rather than rise in line with inflation, the tax-free personal allowance will remain at £12,570 and the higher-rate threshold at £50,270 in England, Wales and Northern Ireland (Scotland has different tax thresholds).
The freeze is expected to drag about 3mn people into paying higher rates of income tax by 2026, according to analysis by the Institute for Fiscal Studies.
The freeze to the inheritance tax “nil-rate band” will also be extended from 2025-26 to 2027-28, in move that could raise at least half a billion pounds for the Treasury.
From April 2025, electric vehicles will no longer be exempt from vehicle excise duty.
The chancellor announced plans to substantially reduce tax-free allowances that benefit investors.
Capital gains tax allowances will be pared, with the annual tax-free allowance slashed from £12,300 to £6,000 from next April, halving again to just £3,000 from April 2024.
The tax free dividend allowance will be halved from £2,000 to £1,000 from next April, and halved to just £500 from April 2024.
This will hit investors who hold income-paying shares outside tax wrappers like Isas and pensions, as well as costing limited company directors who are remunerated through dividends.
The triple-lock on the state pension was maintained, meaning a 10.1 per cent boost for pensioners next April.
The full annual amount of the new state pension will rise above £10,000 for the first time next year, and will be worth over £200 per week.
Pension credit, a benefit received by the poorest pensioners, will also be uprated by 10.1 per cent.
However, the chancellor said a review into the current level of the state pension age would be published in “early 2023”.
Cost of living payments
From next April, the current package of help measures with energy bills will be more targeted at the lowest-earning households.
Currently, the energy price guarantee caps energy bills for the average home at £2,500 per year. From next April, this cap will rise to £3,000, and remain at this level for 12 months.
The £400 support package received by all UK households will not be repeated, but households on means tested benefits will receive a cost of living payment worth £900, pensioner households will receive £300 and those with disabilities £150.
The measures will be partially funded by higher windfall taxes on energy companies.
The chancellor confirmed that both means-tested benefits and the national living wage would also rise by 10.1 per cent next April.
There were no changes to stamp duty — one of the few “mini” Budget measures to have survived intact.
However, the chancellor said these measures will only remain in place until March 31 2025.
Former chancellor Kwasi Kwarteng doubled the threshold at which stamp duty would begin to apply in England and Northern Ireland to £250,000.
First-time buyers were also exempted from paying the tax on the first £425,000 of their purchase, up from £300,000.
Hunt said that change would now be temporary, “creating an incentive to support the housing market and the jobs associated with it by boosting transactions during the period the economy most needs it”.
Additional reporting by George Hammond