Jeremy Hunt announces tax increases for all and says the UK is in recession

Jeremy Hunt has said he wants “those who have more to contribute more” as he unveils plans for all Britons to pay more tax.

The 45 per cent top tax rate, which Liz Truss and Kwasi Kwarteng sought to abolish less than two months ago, will now apply to income of £125,000 instead of £150,000.

Rebates and thresholds for income tax, national insurance and inheritance tax will be frozen until April 2028, two years longer than previously planned. This means that many more Britons will be pushed through thresholds to pay more of these taxes due to the effects of inflation.

Hunt insisted that despite the freezes, Britain would “still have the most generous set of tax-free breaks of any G7 country.”

The chancellor said that from 2025, electric cars will no longer be exempt from paying excise duty on vehicles.

Hunt extended the windfall tax to energy companies, which he said would raise an additional £14bn. From the beginning of next year until March 28, the tax on energy gains will increase from 25 to 35 percent. There will also be a new 45 percent tax on electricity generators.

Hunt said he “had no objection to taxes on windfalls if they are really windfalls caused by unexpected increases in energy prices. Any such tax should be temporary, not deter investment, and recognize the cyclical nature of energy businesses.”

Qdos CEO Seb Maley commented: “Freelancers have been buried in bad news recently and this budget is not helping. The Chancellor talks about stability and growth, but she has abandoned the self-employed, who are essential to ensure both. Cutting the dividend tax threshold adds insult to injury.

“The government works on the assumption that small businesses have just as deep pockets as big business and can absorb these freezes and tax increases. The reality is that many cannot.

“The past few months have been a rollercoaster ride for contractors, in particular, who were led to believe that IR35 was going to be repealed, only to have the government cruelly break this promise weeks later.

“At the very least, the government must address the fundamental flaws that continue to plague the IR35 rules and see thousands of contractors forced to work with zero rights. If the chancellor believes that he has solved the IR35 problem, he is wrong. After reversing the repeal of IR35, calls for review are likely to increase.”

Hadyn Rogan, Partner and Tax Law Specialist at Weightmans LLP, said: “Following the ‘mini budget’ in September, it came as no surprise that the Chancellor had to look to raise taxes and cut appropriations where possible to help provide some stability.

“The cut in the tax-free dividend allocation from £2,000 to £1,000 was an example of this. However, this is likely to disproportionately affect small businesses and could have a potentially damaging impact on the economy, as the cut in tax relief combined with the earlier increase in corporate tax will significantly increase the tax burden on many businesses. .

“While the money needs to be recovered, these changes could cause long-term damage and it is unlikely that many small businesses will be able to absorb these additional costs along with increased energy costs over the winter and hopefully other support, in the future. in the form of grants, for example, will be provided instead.

Joanne Thorne, Technical Compliance Manager at SJD Accountancy, said: “Spending cuts and tax increases are a simple way for the Chancellor to start closing the gap in UK finances, but it will be the self-employed who feel the pressure of these more extremely.

“Reducing the capital gains tax threshold, which is the tax paid on any gain made from selling an investment asset, such as property or shares, offers a quick fix to raise money for government coffers.

“Halving the tax-free allowance from £12,300 to around £6,000 in 2023 and to £3,000 by 2024 could hit people across the board. However, this move is another blow to limited partnership directors who may have incorporated this tax efficiency into their company exit strategies. Many may now be forced to reconsider any exit strategy they have previously implemented.

“With confirmation that the Chancellor is also cutting the tax-free dividend allowance from £2,000 to £1,000 for next year and halving it again to £500 by April 2024, alongside existing rate increases tax on dividends (by 1.25 percent), and next year’s Corporation Tax make today’s declaration a triple whammy for Corporation contractors.

“It is disappointing that the contractor community continues to fight for financial security after a difficult few years, and government policies seem to overlook the valuable role they play in the UK economy.

“The Chancellor described this as a ‘balanced plan for stability’ but what we have seen today with these policy changes is a combination of squeezing and freezing. There is no question that tax planning in the coming years for every self-employed individual will be absolutely essential.”

Giles Coghlan, HYCM’s Chief Market Analyst, added to his comments saying: “With tax increases and spending cuts topping the agenda, today’s budget marks a marked return to austerity to a degree not seen since the aftermath. of the 2008 global financial crisis. To calm markets, the general sentiment of Chancellor Jeremy Hunt’s statement was that the UK now intends to live within its means, without stifling growth.

“In the end, there were few surprises: a strict, ‘kitchen sink’ budget had already been quoted in sterling, and bond markets tend to like austerity because it disinflates. This is why UK Chancellor Hunt said the statement offers a £55bn consolidation, meaning inflation and rates end up significantly lower. However, when the statement was published, expectations for next year’s interest rates remained around the 4.5% mark, albeit slightly lower than before the statement.

“As Hunt ushers in the era of Trussonomics, which tried to stimulate the economy too quickly, there is an equal and opposite risk that the Chancellor will depress the economy too quickly, potentially causing further economic and political upheaval. Hunt tried to issue a statement that avoids both extremes. All things considered, this was as good as it could have been. The GBP initially sold on the OBR’s projections for GDP not to grow again until 2024, but the reaction was marginal. The GBP is more likely to be pushed and pulled now with the latest USD news, as the UK budget was fully priced to the market and more or less as expected. The UK chancellor is now likely to sigh with relief.”

Jatin Ondhia, CEO of Shojin, said: “Sunak and Hunt have been caught between a rock and a hard place. The pressure to plug a £55bn tax hole has led to a Dickens Autumn Statement, which left little room for the rabbits to be pulled out of the hat. While the main focus of these austerity measures is to try to fix the country’s finances without rocking the markets, the giant elephant in the room is that the housing crisis is deepening.

“Housing affordability, quality and volume is worsening for residents as upward pressure on rent is exacerbated by increased demand and decreased supply of housing. This is a national problem and one that can only be solved by taking decisive action to support housing development and drive new home delivery. With housing representing the highest cost of living for most, we cannot afford to have this ongoing crisis swept under the rug once again in the face of mounting fiscal pressures.”

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