Autumn Statement November 2022

Jeremy Hunt, Chancellor of the Exchequer, as part of the 'Autumn Statement' (or mini-budget), made the following announcements, that can affect investors in the UK.

• The UK is in recession
  • Forecasts predict the UK economy shrinking by 1.4% next year. This will likely affect the performance of the UK's top 250 firms, and has ramifications for global investors. Value seekers may wait, then buy into UK funds or stocks. income and growth seekers may look to funds in other regions.
• Income tax
  • Top rate of tax lowered
    • The highest earners start paying the top rate of tax will be brought down from £150,000 to £125,140 from April 2023.
  • Other income tax thresholds frozen
    • Income tax personal allowance threshold will be frozen until 2028 the chancellor announces. This means millions of people will end up paying more in tax as their wages grow due to inflation.
  • Investors should look to maximise all of the different tax allowances within their entire household, both within this financial year, and going forward. They will also need to consider how they withdraw money from pensions and investments.
• Dividend threshold lowered
  • The tax free dividend threshold to lower from £2,000 to £1,000 next year, then to £500 from April 2024.  Investors buying shares to use dividends for income need to re-think their strategy. Investors will need to look at maximising the use of ISA allowance and pension income as a minimum and potentially more complicated tax structures.
• Capital Gains tax changes
  • CGT exemption (tax free annual amount) is to decrease from £12,300 to £6,150 next year, then £3,000 in April 2024. Selling shares and units from a General Investment Account and staying under this tax threshold will now be harder, and additional expert planning is required.
• Pensions increase
  • State pensions will rise by 10.1% in line with inflation from April 2023. This is good news for investors as it means their private investments and pensions do not need to do all the 'heavy lifting.'
• Energy Profits Levy increases
  • The levy on energy firm profits will increase from 25% to 35% from January 2023 and stay in place until March 2028. It had previously been scheduled to run until the end of 2025. This may affect the stock market performance of energy firms, and investors with high levels of exposure in these firms may want to adjust their investment strategy.
• Bank profit levy
  • From April 2023, banks will be charged an additional 3% rate on their profits above £100mn. This may affect the stock market performance of the banking sector and investors should bear that in mind with their future strategies.