Jeremy Hunt has agreed to increase the state pension and benefits in line with September’s inflation rate, adding that the energy price guarantee will continue after April 2023.
But, in his autumn budget, the chancellor also confirmed a number of tax changes will kick in next year in an attempt to shore up the country’s finances.
Hunt has frozen or cut several tax thresholds, extended the windfall tax on energy producers and put the squeeze on department budgets.
We take a look at some of your questions. For more, see our autumn budget tax changes in full.
1. So council tax is going up by 5% next year?
Pretty much. As it stands, local authorities cannot raise council tax above 2.99% without a local referendum.
But budget small print shows Hunt has scrapped this rule, allowing councils to increase council tax by up to 5% at their own discretion.
This money will go towards social care. Treasury figures suggest 95% of local councils will raise the tax by the full amount next spring.
2. What is the plan to help pensioners?
The triple lock will be honoured next year meaning the state pension will rise by 10.1% in April 2023.
This will take the new state pension from £185.15 to £203.85 a week.
The basic state pension, for those who reached state pension age before April 2016, is currently £141.85 a week, and will go up to £156.20. This can, in some cases, be topped by pensions credit which will also rise by 10.1% in April.
The government’s review on the age at which the state pension is received, currently 66 and going up to 67, will be published early next year.
3. I am due to start collecting my state pension in April 2023. Will the 10.1% be applied to what I have been predicted to get?
Yes. The figures should be increased in your final paperwork.
4. Will expats getting a UK pension qualify for the triple lock increase?
If you are abroad, you will qualify for the state pension increase if you live in a European Economic Area country or a country which has a social security agreement with the UK.
These are Ireland, Iceland, Norway, the USA and several more. You can find the full list on the government’s ‘reciprocal agreements’ page.
5. As a married pensioner in receipt of disability living allowance and housing benefit, how will the budget affect us?
The state pension is going up by 10.1%. So are benefits, so you should see two parts of your income rise by 10.1%. Possibly three, if you receive pensions credit which is also rising by 10.1%.
More cost of living grants are also lined up – this will be an extra £300 if you’re a pensioner and £150 if you’re on disability benefits.
6. When is the 45p threshold reduced from?
At the start of the next tax year anyone earning £125,140 will be paying 45p in income tax on anything they earn over that – down from the current threshold of £150,000, where it has stood since 2012.
It means an extra £1,243 in income taxes for anyone currently earning more than £150,000 but will also drag many thousands of people into the 45p tax bracket for the first time which will chip into the incomes of the ‘middle earners’.
You can use our calculator to work out how your pay is changing.
7. What do the income tax thresholds mean for my child benefit?
The chancellor has extended the freeze on income tax thresholds and allowances for two years.
The stealth tax was introduced by now Prime Minister Rishi Sunak back in 2021 and was originally set to be in place for four years until 2026. The thresholds will now be frozen for six years until 2028.
While it’s normal for people to pay more tax as they climb the career ladder, it means that even middle earners could face paying the 40p rate of tax. That means more workers will fall into the high income child benefit trap – meaning some will have to repay more of their support back while others will have to repay the full amount.
Yes, but your time to claim it is now limited.
In September, the nil-rate threshold of stamp duty rose from £125,000 to £250,000. The nil-rate threshold paid by first-time buyers rose from £300,000 to £425,000.
The maximum purchase price for which first time buyers’ relief can be claimed was increased from £500,000 to £625,000.
Sadly, these stamp duty cuts will now be time-limited, ending on 31 March 2025.
9. And what does this all mean for the housing market?
House prices could fall if disposable incomes fall and people are unable to get the mortgages they want for the house they are buying. Remember mortgage rates are particularly high right now.
But most people do not buy or sell homes for that reason – they buy or sell according to the circumstances in which they are living their lives – children, divorce, job relocation and so on – although, of course, the price they pay and the size of their home is based on their income.
If the Bank of England raises the bank rate less dramatically as a result of these measures, or starts lowering them, this could be supportive for house prices. That’s not dependant on the autumn statement though. See more in our article on the best time to buy a house.
10. Will there be additional help for households when the energy price guarantee ends on 31 March 2023?
The energy price guarantee currently caps the average bill at £2,500.
From 1 April 2023, this will rise to £3,000. While that shields us from the 50% increase that analysts had predicted, it’s still around £500 higher a year which is a lot of cash.
11. Will we get any more cost of living help?
Indeed. There will also be additional cost of living payments – although we’re yet to find out when these will be handed out.
This will be £900 for those on means-tested benefits and £150 for those on disability benefits, plus £300 for pensioners. The most vulnerable people could get up to £1,350 in total.
12. I’m a private renter – will my rent be capped at 7% next year?
No. Rent will be capped at 7% next year, but only for social housing tenants. Meaning around 5 million private renters like you will be excluded.
A renter’s reform bill is underway though, which will ban no-fault evictions and strengthen your rights as a private renter. It will also introduce a new ombudsman which could help fight unfair rent rises.
More on this in our renters’ rights guide.
13. We are buying a small retailer next March. Business rates are currently benefiting from a 50% rates reduction. Has this been extended?
Yes, the treasury will increase and extend rates relief for retail, hospitality and leisure firms from 50% to 75% for 2023 to 2024.
The relief will be capped at up to £110,000 per business.
14. I earn £75,000 a year. how much is my tax going up?
I’m assuming you’re referring to the next tax year. If you are just looking purely at income tax, you earn below the threshold for the highest rate.
However, your personal tax-free allowance and national insurance threshold is being frozen until 2028.
The extended freeze means any potential pay rise could drag you into a higher tax bracket and even if it does not, you will see more of your income taxed.
The basic personal tax-free allowance is £12,570 and you are then taxed at the basic rate (20%) between £12,571 and £50,270.
You are then taxed 40% on your earnings between £50,271 and £75,000 (up to the new limit of £125,140).
With £75,000, you pay tax and national insurance on £62,430 of your income.
That means you’ll pay around £23,227 in tax and national insurance in 2022.
15. How long is the recession expected to last?
The Bank of England said last month that the country could be at the start of an eight-quarter recession, the longest since reliable records began in the 1920s.
Gross domestic product could shrink for every quarter for two years, so that’s the estimated time frame we’re looking at.
