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Autumn Statement round-up

Autumn Statement round-up

The Chancellor, Jeremy Hunt, delivered the Autumn Statement (Medium-term Fiscal Plan) on 17 November 2022. The plan states that the government’s priorities are “stability, growth and public services,” and sets a markedly different tone from the “Growth Plan” published in September, which promised to make “growth the government’s central economic mission."

As anticipated, the effect of the announcement is that (as Hunt had pre-warned) everyone will have to pay a bit more tax, and many of the changes will be achieved through freezing or lowering tax thresholds as opposed to changes to headline rates.

What are the headline points for employers and workers?

We set out below some of the key points from the Autumn Statement for employers and workers. Most of the measures will require legislation via the Autumn Finance Bill 2022, or other/secondary legislation before coming into force.

Workers

  • Headline rates of income tax remain unchanged
  • Income Tax Additional Rate Threshold will be reduced from £150,000 to £125,140 from April 2023
  • Other tax thresholds within Income Tax and National Insurance Contributions will be fixed until April 2028
  • The government will reduce:
    - the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024
    - the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024

Employers

  • The level at which employers start to pay employer NICs for their employees will be fixed at £9,100 until April 2028
  • The National Living Wage will increase for individuals aged 23 and over to £10.42 an hour from April 2023
  • Other National Minimum Wage rates will increase as follows:
    - 21-22 year olds - increase by 10.9% to £10.18 an hour
    - 18-20 year olds - increase by 9.7% to £7.49 an hour
    - 16-17 year olds - increase by 9.7% to £5.28 an hour
    - apprentice rate - increase by 9.7% to £5.28 an hour
    - accommodation offset rate - increase by 4.6% to £9.10 an hour
  • In terms of employment benefits, the government is setting rates for Company Car Tax until April 2028, which will continue to incentivise the take up of electric vehicles

Other

  • The Autumn Statement says very little about the Retained EU (Revocation and Reform) Bill and, in fact, fails to mention the Bill by name. However, it does say that it will review retained EU law to identify changes that can be made over the next year with the greatest potential to unlock growth in key growth industries - digital technology, life sciences, green industries, financial services, and advanced manufacturing. Whether the Bill, therefore, continues in its current form and with its current timelines remains to be seen.
  • Alongside the Autumn Statement the government has published the Consultation Response on Solvency II, which seeks to move away from EU rules.
  • In respect of pensions - the state pension "triple lock" will be retained, so that the state pension will be uprated by inflation, in line with the government's previously stated commitment. In addition, the pensions lifetime allowance will remain frozen at £1,073,100 until April 26.
  • The Autumn Statement says that the government has reversed nearly all the measures that were in the Growth Plan, but it either remains silent on or does not identify changes to any of the measures marked in green in the “Budget Hokey Cokey” article - so it looks as if those proposals are continuing.

What now?

It appears as if the policies announced in the latest budget are here to stay a bit longer, and markets have remained fairly calm since the announcement. Therefore, employers should now start preparing for implementation of any proposals that affect them and their workforce.

The net effect of the proposals is that everyone is going to be paying more over the next few years and therefore will have less money in their pockets. The cost-of-living crisis is rising at its fastest rate for 41 years, and the government has been criticised for hitting middle income households the most. So, although national minimum wages are increasing, the proposals are only likely to put more pressure on employers to ease the financial struggles of its workers, whilst shouldering their own increased financial burdens.