Chancellor To Reverse Stamp Duty Cut As He Announces Higher Taxes And Spending Reductions

Chancellor Jeremy Hunt has just finished delivering his statement on the economy in the House of Commons.

He has announced tens of billions in tax rises and spending cuts.

Here are the key announcements:

UK now in recession

With forecasts predicting the economy will shrink by 1.4% next year the chancellor has acknowledged we are in recession, and things will get worse before they get better.

Stamp duty

Hunt confirmed in a statement a few weeks ago that the cut to stamp duty would remain in place.

But now he has set a date for it to end, as he announced a raft of measures aimed at balancing the books.

He said: “The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-budget will remain in place but only until March 31 2025.”

Capital gains tax

Tens of thousands of people will pay capital gains tax for the first time after changes announced in the Autumn Statement.

Hunt has halved the capital gains tax threshold, taking it from £12,300 to £6,000. It will then be cut to £3,000 from April 2024.

Inheritance tax

Hunt has confirmed inheritance tax will remain frozen, though the triple lock on pensions is to remain in place.

Council tax

Councils are to be given the power to hike council tax by 5% annually. At present, they cannot make increases of more than 3%, including a 1% precept to pay for social care, without holding a local referendum.

Top rate of income tax

The chancellor has announced that the threshold for when the highest earners start paying the top rate of tax will be brought down from £150,000 to £125,140.

“Those earning £150,000 or more will pay just over £1,200 more a year,” he said,

Windfall tax

There is to be a significant hike in windfall taxes, with oil and gas firms seeing the levy rise from 65% to 75% of profits on UK operations until March 2028 – extended from December 2025.

There will also be a 40% tax on profits of older renewable and nuclear electricity generation.

The government estimates that will raise £14bn next year alone.

Spending squeeze on government departments

Hunt has confirmed that there will be spending squeezes on government departments, except health. He says that “tough decisions to deal with inflationary pressures in the next two years” will be made.

He added that overall spending on public services will increase, after accounting for inflation though, for the next five years.

Motoring tax system

The Chancellor has announced electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”.

Company car

Company car tax rates will remain lower for electric vehicles and the government will limit rate increases to 1ppt a year for three years from 2025.

Cost of living support

There will be targeted support with the cost of living for those on low incomes, disability benefits and pensioners.

Additional payments of £900 will be paid to those on means-tested benefits, £300 to pensioner households and £150 to people on disability benefits.

Energy payments from April

Help for energy bills will be extended, but it will be less generous, which means households will see their energy bills increase again April.

A household using a typical amount of gas and electricity will pay £3,000 annually, up from £2,500, as the Energy Price Guarantee rises. The scheme will run for 12 months from April.

Northern Powerhouse rail and HS2

Hunt goes on to confirm that rail projects will go ahead as planned: the Northern Powerhouse rail, the HS2 and the East West Rail.

OBR reaction:

House prices are set to fall by 9% over the next two years, the Office for Budget Responsibility (OBR) predicts.

It projects that property prices will drop between Q4 2022 and Q3 2024, fuelled by higher mortgage rates as well as the wider economic slump.

The OBR says that overall this year, the economy is still forecast to grow by 4.2%.

But it said it would shrink by 1.4% next year, before rising by 1.3%, 2.6%, and 2.7% in the following three years.

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