It is quite a bizarre situation we find ourselves in, sending out another Budget update a mere two months after the previous one, but then again these have been rather unusual times on the political landscape.
Nevertheless, the new Chancellor, Jeremy Hunt, delivered his plans yesterday which are designed to tackle rising prices and restore the UK’s credibility with international markets.
What’s changed since Kwasi Kwarteng’s Autumn Budget?
A number of the announcements from September’s budget have since been cancelled or changed. These include:
Ex-Chancellor Kwarteng had promised to cut the basic rate of income tax from 20% to 19%, and to scrap the higher-rate tax entirely.
This has been replaced in Hunt’s Budget with plans to freeze the rate of income tax at 20% until 2028. The highest rate of income tax now kicks in for those earning over £125,140, rather than £150,000 as it was previously, and will remain at 45%.
In September, it was announced that the stamp duty threshold would be permanently raised to £250,000 (£425,000 for first time buyers).
Hunt has now introduced a deadline of March 2025, at which point this cut will be reversed.
What’s new in Hunt’s Budget?
In line with the other tax freezes announced yesterday, inheritance tax has been frozen until 2028. The rate had already been frozen by Rishi Sunak during his stint as Chancellor, but Hunt has now extended that freeze for an additional two years. The current nil rate band is £325,000.
Capital Gains Tax
The annual allowance for CGT has been cut significantly from £12,300 to £6,000. This will affect anybody selling an asset, such as company shares or second homes.
The tax on dividends has risen by 1.25%, and the threshold dropped from £2,000 to £1,000. This will drop further to £500 in 2024. This will affect anybody who receives income from dividends or the sale of shares.
State Pension Rise
There was a little uncertainty around whether the rise would go ahead as it should under the “triple lock”, but yesterday Hunt confirmed that the state pension would indeed go up to match inflation, bringing it to £203.85 per week. Next year, the government is expected to publish their review on the age at which state pension is received, with an expected increase to 67 as the state pension age.
Energy Bill Relief
The government announced a sliding-scale package of support to tackle rising energy bills amid the cost-of-living crisis. Until the end of this tax year, all households will have their energy bills capped at £3,000, with a support discount of £400. In April, that will change significantly and the universal payment will be replaced by means-tested support. The graphic below from the BBC gives a helpful explanation of the changes expected in April 2023:
Of course, some of these announcements will affect you more than others. This is a good time to check your finances are working as hard as they can, and that you’re making the most of all the available allowances and tax-efficient opportunities available.
Contact us if you’d like a review of your financial situation.