The Autumn Statement 2022 comes at a time of significant economic challenge for the UK and global economy. The conflict in Ukraine has contributed to a surge in energy prices, driving high inflation across the world. Central banks are raising interest rates to get inflation under control, which has pushed up the cost of borrowing for families, businesses, and governments. Growth is slowing and the International Monetary Fund (IMF) expects a third of the global economy to fall into recession this year or next.
This all follows higher levels of government debt due to the economic impacts of the COVID-19 pandemic and current energy crisis. Debt interest spending is now expected to reach a record £120.4 billion this year. These factors have contributed to a significant gap opening between the funds the government receives in revenue and its spending.
The Autumn Statement reduces the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes. Income tax, National Insurance and Inheritance Tax thresholds will be maintained at their current levels for a further two years, to April 2028. The government will also reduce the Dividend Allowance and Capital Gains Tax Annual Exempt Amount.
To help get debt falling, for the years beyond the current Spending Review period, planned departmental resource spending will continue to grow, but slower than the economy, at 1% a year in real terms until 2027-28. Total departmental capital spending in 2024-25 will be maintained in cash terms until 2027-28, delivering £600 billion of investment over the next 5 years. This includes maintaining the government’s commitments to deliver major infrastructure projects.
Alongside the other measures, the thresholds at which people pay income tax and national insurance will not change from April 2023 (tax year 2023/24) to April 2028 (tax year 2027/28).
From 2023/24 to 2027/28, the Personal Allowance for Income Tax, Primary Threshold for class 1 National Insurance, Lower Profits Limit for class 4 NI and the Lower Profits Threshold for class 2 NI will remain at £12,570 per year.
Above this threshold, the following rates will apply:
- 20% basic rate income tax
- 12% employee national insurance class 1
- 9% self-employment national insurance class 4
- Flat rate of £3.45 per week for self-employment national insurance class 2 (see below)
From 2023/24 the Higher Tax limit for income tax (40%), Upper Earnings Limit for class 1 NI and Upper Profits Limit for class 4 NI will remain at £50,270 per year.
Those who earn the NLW will also see their salary grow, as the below increases will come into play in 01.04.23:
- For 21-22 year olds by 10.9% to £10.18 an hour;
- For 18-20 year olds by 9.7% to £7.49 an hour;
- For 16-17 year olds by 9.7% to £5.28 an hour;
- For apprentices: by 9.7% to £5.28 an hour
By taking difficult decisions on tax and spending, the Autumn Statement sets out a clear and credible path to get debt falling and deliver the economic stability needed to support long-term prosperity.
