While Jeremy Hunt may have stuck to the government’s promise not to raise tax rates, the Autumn Statement means more of most peoples’ income and capital will find its way into the Treasury’s coffers during the course of this parliament.

In order to fill the £55 billion ‘black hole’ in government finances caused by the energy support package and higher borrowing costs, the chancellor outlined £30 billion of spending cuts and £25 billion of tax grabs.

The reaction across the currency, government bond and equity markets was fairly muted, in contrast to the Kwarteng ‘mini-Budget’, which is as close to a seal of approval as it gets these days.

WHO ARE THE WINNERS?

The most obvious winners are pensioners, a key demographic for the Conservatives, thanks to the decision to reinstate the ‘triple lock’, which means the state pension rises by 10.1% next April in line with September’s consumer price index.

Weekly payments will rise from £185.15 to £203.85, while the annual payment rises to £10,600, topping the £10,000 figure for the first time.

Pension credit, which is a top-up benefit for pensioners on the lowest income, will also rise in line with inflation and could be worth up to £3,300 per year.

The downside for those approaching retirement is the state pension age review next spring is likely to recommend increasing the pension age from 66 to 68 earlier than previously planned.

Banks will be celebrating the news the banking surcharge is to be cut from 8% currently to 3% next April, and electricity companies including renewable energy producers can consider themselves winners despite the introduction of a 45% windfall tax.

The devil is in the detail as the tax is temporary and it targets excess profits not overall profits. The pricing level at which it applies is higher than feared and there are investment allowances which can offset its impact to a large degree.

North Sea oil and gas companies will see their windfall tax extended to 2028, but again the tax is at a higher price level than previously anticipated.

Small businesses will benefit from a cut to business rates, which will reduce the burden on them by £5 billion next year, with retail, hospitality and leisure especially favoured.

However, a rise of 9.7% in the national living wage – which will help the low-paid – will add to the costs facing small and large businesses.

House buyers can celebrate a small win as the stamp duty cut has been extended to the end of March 2025, and by increasing taxes by the back door the chancellor has reduced the pressure on the Bank of England to raise rates as sharply, meaning the housing market is likely to deflate slowly rather than implode.

Also, around four million families living in rented social housing will receive help in the form of 7% cap on rent rises next year.

WHO ARE THE LOSERS?

The main losers are high earners, as the threshold for the 45% marginal tax rate comes down from £150,000 to £125,140 in a move expected to raise
£12 billion.

Also, the tax-free personal allowance has been frozen from 2026 out to 2028 meaning it stays at £12,570 for basic-rate tax payers while the upper earnings limit and upper profit limit stay at £50,270 for 40% tax payers.

Freezing these thresholds for another two years means up to three million extra workers will move into higher tax brackets, saving the Treasury as much as £6 billion per year.

Exemption from capital gains tax falls from £12,300 to £6,000 and the dividend allowance falls from £2,000 to £1,000 in April 2023 and £500 in April 2024, which will impact anyone who doesn’t invest using a tax wrapper such as a SIPP or an ISA.

Demand for tax and investment advice is likely to soar as is the use of higher-risk products and services such as VCTs (venture capital trusts) and spread betting, where capital gains are tax-exempt.

The cut to dividend allowances will also impact business owners who are paid via dividends, which attract a lower tax rate than earnings, while the cut to capital gains tax exemption will affect business sellers, owners of second homes and landlords.

Drivers and companies which use road transport will also be also worse off under a proposal by the OBR (Office for Budget Responsibility) to raise fuel duty by 23% or 12p per litre from next March.

This particular nugget was not included in the Autumn Statement but looks to reverse the 5p per litre cut made by Rishi Sunak when he was chancellor and reinstate the long-abandoned price escalator of CPI plus 6%.

Owners of electric vehicles will also be worse off from April 2025 when they will be expected to pay vehicle excise duty.

While extending the duty will come nowhere near replacing the £30 billion per year raised from fuel tax, which will disappear once the roads are dominated by electric vehicles, it does signal a change in attitude as electric cars and vans become more mainstream.

Martin Beck, chief economic advisor to the EY ITEM Club, summarised the measures as follows: ‘In the end, the statement was a package of tax rises, mainly on energy producers, high earners and unearned incomes, and public spending restraint, peaking at £55 billion per year, or just over 2% of GDP (gross domestic product), in 2027-28.

‘The size of the package was broadly in line with expectations. What also met predictions was that most of the planned fiscal tightening will not kick in until the second half of the decade, when, in the EY ITEM Club’s view, the economic situation may give a future chancellor the option to change course.’

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