Hunt scraps Truss-Kwarteng tax cut plans
Chancellor Jeremy Hunt has used his first Autumn Statement to announce a volte face on personal tax from the doomed September mini-Budget – and in turn reveal around £24bn in tax rises.
Speaking from the Despatch Box today, Hunt announced freezes to tax thresholds that will see millions of people paying more tax on their wages over a longer period of time.
Hunt scrapped the Truss/Kwarteng plan of cutting the basic rate of income tax to 19% from April 2023.
Hunt said: “While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable.”
The basic rate of income tax will therefore remain at 20% indefinitely. This, said the Chancellor, will is worth around £6bn a year.
Hunt also hit higher earners by lowering the top rate of tax to £125,000 from £150,000. He said: “It’s only right that we ask those with more to contribute more. But will will not raise the headline rates of taxation.”
Allowances and thresholds for income tax, national insurance and inheritance tax will be frozen for another two years, to April 2028.
Hunt said: “We’ll still have the most generous set of tax free allowances of any G7 country.”
Meanwhile, the dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 in April 2024.
In total, he said that the overall tax burden will rise by just 1%.
Hunt also scrapped the planned cut in dividends tax by 1.25 percentage points from April 2023. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. This is valued at around £1bn a year.
Those hoping that the Government would keep in place its gas and electricity support scheme past next April will be disappointed after Hunt announced plans that the household energy price cap will rise from £2,500 to £3,000 at that point.
Finally, the Chancellor revealed that the National Living Wage will rise by 9.7% to £10.42. This, said Hunt, will benefit two million lower-paid workers across the UK, and is the largest ever rise of the National Living Wage.