Chancellor Jeremy Hunt has outlined his plans to restore economic stability in the wake of the last administration's disastrous mini-budget. Unlike his predecessor who unveiled a 'tax-busting' plan for the economy, which ended up unleashing market turmoil, Mr Hunt has told everyone that they will have to pay more tax from next year.
The chancellor's Autumn Budget will see the tax burden rise to its highest sustained level since the Second World War. Addressing MPs in the House of Commons this morning, Mr Hunt set out plans for almost £25 billion in tax increases.
Treasury analysis suggests about 55 per cent of households will be worse off as a result of the tax and spending decisions made in the autumn statement. But Mr Hunt said his decisions would protect the most vulnerable, and place the highest burden on the highest earners.
READ MORE: 11 key announcements from Jeremy Hunt's Autumn statement including new cost of living payments
Mr Hunt said his decisions will lead to a “substantial tax increase” despite headline rates of taxation remaining broadly the same. He has been accused of taxing by 'stealth' over his methods of freezing thresholds, dragging more people into higher levels of taxation.
Responding to Mr Hunt in the Commons, shadow chancellor Rachel Reeves said that his "raft of stealth taxes” would take billions of pounds from ordinary working people. She described the plans as "a Conservative double whammy, that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages".
The chancellor's budget also signals the end of stamp duty cuts, leaving families facing higher housing costs, and outlines how local authorities will be able to charge higher council tax rates. Mr Hunt also confirmed that electric vehicle owners will begin paying tax in the same way as petrol and diesel vehicles owners.
So how will all of these new tax measures affect your wallet? Here's what Mr Hunt's tax plans mean for working people.
More people paying higher rates of Income Tax
People who pay income tax pay either 20 per cent, 40 per cent or 45 per cent depending on how much income they earn. Those headline rates have not been changed in the Autumn budget, but some people will have to pay higher taxes next year due to changes to the thresholds at which those rates kick in.
The highest earners will be hit the hardest. The rate at which people pay 45 per cent on their income will be lowered from £150,000 to £125,140. According to the Treasury, that means that an extra 232,000 people will have to pay the top rate of income tax from April.
The change will mean that someone earning £150,000 will pay just over £1,200 more a year, Mr Hunt said.
For people in the lower tax brackets, thresholds for the basic and higher rate of Income Tax and National Insurance will be maintained at their current levels for a further two years, taking the current freeze to April 2028. That means that more people will have to pay higher taxes as their wages rise over the next few years.
According to Treasury analysis, an extra 92,000 people will be paying tax above the personal allowance (£12,570) and 130,000 will be paying the higher rate of income tax (on earnings above £50,270) in 2027/28.
Mr Hunt also announced a freeze on Inheritance Tax - the tax paid on the estate of someone who has died. The current rate is 40 per cent and it is only charged on the value of the estate above the threshold of £325,000. That threshold will be frozen for a further two years until 2028, Mr Hunt announced today.
The threshold for capital gains tax - tax paid on any profit made when you dispose of your assets, for example selling a second home - will be lowered. Currently, you do not have to pay the tax on any gains below £12,300. But from April next year, that level will be lowered to £6,000. The threshold will then be slashed again in 2024-25 to £3,000.
Stamp duty cuts to be abolished
The September mini-budget included changes to stamp duty which Mr Hunt has decided to stick to for now before abolishing them. He said this will create "an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it".
His predecessor Kwasi Kwarteng raised the general threshold at which stamp duty applies from £125,000 to £250,000, lifting around 200,000 more people every year out of paying stamp duty, according to previous government calculations. First-time buyers, who already paid no stamp duty on the first £300,000 of the price of a property, saw the threshold raised to £425,000.
Mr Hunt said these stamp duty cuts will remain in place, but only until March 31 2025.
Institute for Fiscal Studies director Paul Johnson said Mr Hunt is abolishing “about the only good policy” from Mr Kwarteng’s mini-budget by removing the stamp duty cut in just over two years' time.
The Office for Budget Responsibility (OBR) said house prices are forecast to drop by 9 per cent between the fourth quarter of 2022 and the third quarter of 2024.
Electric vehicle owners to be taxed from 2025
Mr Hunt announced that owners of electric cars, vans and motorcycles will have to begin paying Vehicle Excise Duty (VED) in the same way owners of petrol and diesel vehicles do. He said the move will 'reflect the success of the transition to electric vehicles' and ensure that 'all motorists begin to pay a fairer tax contribution'.
VED is a tax levied on UK vehicles which depends on when they were first registered and their carbon emissions. Owners of electric vehicles are currently exempt from VED, but they now face an annual charge of up to £165 for cars and £290 for vans from April 2025.
The Treasury said the changes are estimated to raise an extra £1.6 billion by 2027/28.
New pure electric cars registered from April 1 2025 will also lose their exemption from having to pay an extra £355 per year if their price is more than £40,000.
The AA has criticised the move, saying that it will "dim the incentive to switch to electric vehicles".
Councils given green light to impose five per cent council tax hike
The chancellor only touched on changes to council tax during his statement in the Commons saying that 'council tax flexibilities' would help to fund social care. Despite not going into detail in his statement, the budget reveals that local authorities will be given the power to charge more Council Tax without holding a referendum first.
Local authorities currently have to hold a vote if they want to increase council tax by more than three per cent, but Mr Hunt is raising that threshold to five per cent. The five per cent comprises of three per cent in general council tax and two per cent for the adult social care precept.
The Treasury has estimated that 95 per cent of local authorites will hike rates by the maximum amount, meaning people could see a significant hike in their council tax bills next year. OBR analysis suggests that the move will increase the average Band D bill by around £250 in 2027/28.
READ MORE:
