The Autumn Budget 2022 - an overview

In his much-awaited Autumn Statement, Jeremy Hunt, the recently appointed Chancellor of the Exchequer, confirmed that the UK is officially in a recession and detailed the government’s plans to try to grow the economy through a number of spending cuts and tax rises. 

So, what are the key changes in the Autumn Statement and how might they affect you?

Let’s look at some highlights

Changes to taxation and wages:

• The main national insurance and inheritance tax thresholds are frozen until April 2028.
• The Personal Allowance and higher rate threshold of £12,570 and £50,270 respectively will remain at these levels until 5 April 2028. Spring Budget 2021 originally froze these amounts through to 5 April 2026.
• The threshold for when the highest earners start paying the top ‘Additional’ rate of income tax of 45% will be reduced from £150,000 to £125,140. This means more people will pay the Additional rate of tax.  
• The annual exempt amount for Capital Gains Tax (CGT) will reduce from £12,300 to £6,000 from April 2023 and then to £3,000 from April 2024.
• Tax-free allowances for dividends will be cut from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
• The minimum wage for people aged over 23 will increase from £9.50 to £10.42 an hour from next April.

The Scottish parliament has the power to set income tax rates and bands that apply to Scottish taxpayers’ non savings, non-dividend income. The Welsh government has the power to set income tax rates applicable to non-savings, non-dividend income.

Although these changes are not due to come into effect immediately, making use of tax-efficient investments could help keep you on track of your long-term financial plan. And we believe ISAs (Individual Savings Accounts) are one of the best ways you can do this. When you invest through an ISA you don’t have to pay personal income tax on any interest or dividends you receive from your investments or CGT on their growth. 

However, it’s important to remember that ISA tax rules may change in the future and ISA tax advantages depend on your individual circumstances. 

Changes to benefits and state pension

• Some good news for pensioners – Mr Hunt confirmed that the state pension would rise by 10.1% from April 2023. There had been many rumours and discussions about whether this would change, but it is now official, and it means an average pensioner will see a £18.70 per week uplift. However, it’s still likely that pensioners will feel the pain of soaring living costs.
• If you’re on Universal Credit (or other benefits), it’s likely that your benefits will increase in line with inflation. However, changes to Universal Credits are very dependent on your individual circumstances. As an example, a single person over the age of 25 on Universal Credit could see payments rise by nearly £34 a month.

Bills and the cost of living

• There continues to be bad news when it comes to energy prices. The typical household will see energy bills rise from £2,500 now to £3,000 a year, from April.
• People who receive means-tested benefits, disability benefits and pensioners will receive cost of living payments, but these will not apply to everyone. 
• If you’re a social housing tenant renting a property, the government will cap the increase in social rents to a maximum of 7% in 2023/24. This will save the average tenant £200 next year.
• If you own an electric car, from April 2025 electric vehicles will no longer be exempt from Vehicle Excise Duty (essentially a vehicle tax). Stamp Duty Land Tax cuts introduced in Kwasi Kwarteng’s mini-budget will remain in place, but only until 31 March 2025.

What to do next?

Changes in policy are likely to affect the budgets of many households and may add new pressure at home. If you’re struggling with the cost of living or concerned about how any of the tax rises might affect you, it's important to find out what help is available. 

Getting financial advice

Life is full of twists and turns, so if you’re looking for help managing finances you may find it useful to work with a financial advisor. A financial advisor will be able to look at your overall situation and longer-term goals to create a manageable plan for you. They’ll be able to look at ways to help you reduce the amount of inheritance tax and/or capital gains tax you pay through estate planning, look at things like pension contributions, unused ISA allowances or generally ways to make your money work harder. The Autumn Statement changes don’t come into immediate effect, so tax year-end planning could really help you get on the front foot. 

If you don’t already have a financial adviser you can find one our ‘Get financial advice’ page.

The Citizens Advice Bureau

To learn more about what help is at hand, you may find it useful to contact the Citizens Advice Bureau. They offer advice and support on paying bills, locations of nearest food banks, mental health support and other useful information about coping in today’s uncertain times. You can also find a page on their website to help with the cost of living. 

Please bear in mind that M&G Investments are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser. The views expressed here should not be taken as a recommendation, advice or forecast.

The value of any fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.

Remember, you can take a look at our glossary for explanations of the investment terms used throughout this article.