Jeremy Hunt, the UK chancellor, unveiled a budget that included tax increases and spending cuts of approximately £55 billion ($65 billion), or 2.5% of GDP. He expects that it would repair the harm his predecessor’s underfunded tax cut, the previous plan has caused harm to Britain’s fiscal and international credibility. The chancellor also froze the income tax, national insurance, and inheritance tax thresholds. It means that wage increases will cause taxpayers to fall into higher tax brackets. The inflation rate for September is 10.1%, which will be added to state pensions, benefits, and tax credits. Budget increases for most government departments will be less than the rate of inflation.
The following tax measures have been announced to help the UK increase GDP and decrease debt-to-gdp ratio.
1) To bring more high incomes into the 45p tax bracket, the threshold for the additional rate of income tax will be lowered. The income tax extra rate threshold will drop from £150,000 to £125,140 because of the Autumn Statement, raising taxes on individuals with high incomes will begin from April 6, 2023.
2) The capital gains tax (CGT) tax-free allowance will drop from £12,300 to £6,000 in 2023–2024 and then to £3,000 in 2025–2026.
3) The dividend tax allowance will be reduced from its present (£2,000) level to £1,000 starting in April 2023, with more reductions to come. From April 2024, the dividend allowance will be cut in half, to £500.
4) As of January 1, 2023, the energy earnings levy rate will increase from 25% to 35% to ensure that oil and gas companies that benefit from increasing profits pay a higher tax rate. In addition, a new, temporary tax of 45% will be levied on the profits of electricity producers, whose profits have increased like those of the oil and gas industry.
5) There will be a freeze on income tax thresholds, but additional payments will be made: £900 to households receiving means-tested benefits, £300 to households with pensioners, and £150 to households receiving disability benefits. The National Living Wage will increase from £9.50 an hour for those over the age of 23 to £10.42 beginning in April, while the state pension, benefits, and tax credits will increase to keep up with inflation.
6) Finally, electric vehicles will no longer be exempt from vehicle excise duty from April 2025.
Michele Ammirati
