Chancellor Jeremy Hunt has today announced the Government’s Autumn Budget, which contained a spate of spending cuts and tax hikes to tackle the estimated 55 billion-pound deficit in Britain’s finances.
Giles Coghlan, Chief Market Analyst, HYCM, said: “With tax hikes and spending cuts leading the agenda, today’s budget marks a stark return to austerity to an extent not seen since the aftermath of the 2008 global financial crisis. To calm the markets, the overarching sentiment of Chancellor Jeremy Hunt’s statement was that the UK now intends to live within its means, without stifling growth.
“Ultimately, there were few surprises – a strict, ‘kitchen sink’ budget had already been priced into the GBP, and bond markets tend to like austerity because it is disinflationary. This is why UK Chancellor Hunt said that the statement delivers a consolidation of £55bn, meaning that inflation and rates end up significantly lower. However, as the statement was released, expectations for next year’s interest rates remained around the 4.5% mark, albeit fractionally lower than prior to the statement.
“As Hunt ushers out the era of Trussonomics, which tried to stimulate the economy too quickly, there is an equal and opposite risk that the Chancellor depresses the economy too quickly, which could cause yet more economic and political upheaval. Hunt tried to deliver a statement that avoids both extremes. On balance, this was as good as it could have been. The GBP sold off initially on the OBR’s projections for GDP to not return to growth until 2024, but the reaction was marginal. The GBP is most likely to be pushed and pulled around now on the latest USD news, as the UK budget was fully priced into the market and pretty much as expected. The UK Chancellor will likely be breathing a sigh of relief now.”
Jatin Ondhia, CEO of Shojin, said: “Sunak and Hunt have been caught between a rock and a hard place. The pressure of plugging a £55bn fiscal hole has led to a Dickensian Autumn Statement, which left little room for any rabbits to be pulled out of the hat. While the main focus of these austerity measures is to attempt to patch up the country’s finances without rattling the markets, the giant elephant in the room is that the housing crisis is deepening.
“The affordability, quality and volume of homes is worsening for residents, as the upwards pressure on rent is being exacerbated by rising demand and a dwindling supply of homes. This is a national issue and one that can only be solved by taking decisive action to support housing development and boost the delivery of new homes. With housing representing the highest living cost for most, we cannot afford for this ongoing crisis to be once again swept under the carpet in the face of mounting fiscal pressures.”
Stefano Vaccino, Founder and CEO at Yapily, said:
“We welcome the action from the Chancellor to protect people on benefits and state pensions, but the reality is that thousands of people up and down the UK are still vulnerable to the impact of inflation and higher interest rates. Enabled by open banking, better access to more tailored financial products and services is no longer a nice-to-have but a must-have in these circumstances. To drive more innovation and ensure the UK remains a competitive marketplace, now is the time for the Government to show a real commitment to building an open finance framework that works for everyone.”
Mohsin Rashid, Co-founder of ZIPZERO, said: “Misery for millions – that is the result of this budget. And we must never forget why the price we all must pay is so high. The failed Truss experiment left a burning hole in the UK economy, the size of £30 billion. From irresponsible to unforgiving government, the bitter return to austerity will no doubt double down on hardship across the whole country.
“People are struggling, and they are desperately concerned. Concerned over how they will pay their bills, keep the lights on and put food on the table. This government’s response is unconscionable: unnamed Council tax ‘flexibilities’, disenfranchising residents from their rights to approve large hikes, and stripping down energy support into a skeleton package unfit to carry consumers past the finish line, all while raising personal taxes.
“Has the government forgotten its own mantra? There’s no magic money tree. Asking the country to play Sophie’s Choice over which essential item to sacrifice this week will only promote personal and national decline, in a new age of Victorian misery. While there are no fruitful horticultural solutions out there, consumers should take advantage of all money-saving opportunities at their disposal. In particular, the ongoing fight for the right of consumer data is revolutionising the marketing sector and providing consumers with generous cash rewards through direct-to-consumer marketing platforms”.
Paresh Raja, CEO of MFS, said: “With a £55bn fiscal black hole to fill, Hunt’s task today was far from easy. Admittedly, the austerity measures announced in the Autumn Statement will contribute to reducing the deficit. However, the announcement will do little to settle the nerves of those in the buy-to-let sector.
“In the midst of rising interest rates and the aftermath of the mini-budget, buy-to-let landlords are seeing the value of their assets decline, while the cost of borrowing and property maintenance continues to rise. These issues have not been addressed today and are harming the viability of owning a buy-to-let property, which is forcing many landlords to consider selling their properties.
“In fact, according to MFS’ research, 40% of landlords are now planning on selling one or more of their properties in the next 12 months; such an exodus from the market would present an apocalyptic challenge to an extremely competitive private rental sector that is already grappling with rampant demand and a perennial undersupply of homes. Make no mistake, if the Government fails to support buy-to-let landlords in the months to come, such a situation would be catastrophic for renters.”
Jatin Ondhia, CEO, Shojin, said: “Sunak and Hunt have been caught between a rock and a hard place. The pressure of plugging a £55bn fiscal hole has led to a Dickensian Autumn Statement, which left little room for any rabbits to be pulled out of the hat. While the main focus of these austerity measures is to attempt to patch up the country’s finances without rattling the markets, the giant elephant in the room is that the housing crisis is deepening.
“The affordability, quality and volume of homes is worsening for residents, as the upwards pressure on rent is being exacerbated by rising demand and a dwindling supply of homes. This is a national issue and one that can only be solved by taking decisive action to support housing development and boost the delivery of new homes. With housing representing the highest living cost for most, we cannot afford for this ongoing crisis to be once again swept under the carpet in the face of mounting fiscal pressures.”
Liz Field, Chief Executive of PIMFA, commented: “While we support the Government’s long-term aim to stabilise the country’s finances and balance the books, regular changes to tax policy can be unhelpful and create confusion for those trying to save for their financial future or leave a legacy to their loved ones. Clarity in terms of tax policy allows people to save and invest for the future, safe in the knowledge that there will be few sudden changes that require them to adjust their own plans.’
“The measures outlined in the Chancellor’s statement today will clearly impact on the ability of UK savers to put money aside as well as incentivising them to do so. We would urge the Chancellor to keep these under review to ensure that millions of people are incentivised to save and invest in future.”
Khalid Talukder, co-founder at DKK Partners,
“Following the chaos of the mini budget, the Chancellor’s top priority was to deal with the black hole in the nation’s finances and prove that Britain has a credible plan to pay its way.
However, there is a fine line between raising revenue from increasing taxes on businesses and risk stifling innovation and investment. With inflation and interest rates still running wild, empowering businesses in the UK’s fintech and financial services industries is critical to job creation and productivity.
Everyone recognises that the country needs to balance the books, but the government must also recognise that businesses need support to drive economic growth for the long term.”
PensionBee CEO, Romi Savova commented: “It’s disappointing to see no plans to increase the current Lifetime Allowance for pensions, which was frozen at £1,037,000 in the previous Budget. While there are already sensible limits on how much an individual can pay into their pension each year, the current Lifetime Allowance limit punishes those who have saved diligently throughout their working life and contradicts the government’s message that everyone should be saving for retirement.
The freeze, coupled with spiralling inflation means the amount one can save into their pension without suffering penalties is plummeting. Continuing to leave the Lifetime Allowance at its current threshold, presents a real threat of long-term damage to the retirement livelihoods of many everyday savers.
The Lifetime Allowance also deters young savers from making meaningful contributions towards their retirement for fear they may exceed it. PensionBee’s research found that workers aged between 18 and 21, with salaries of around £22,000 will exceed the allowance by the time they reach their late 60s, almost a decade before they qualify for the State Pension.
In addition, it’s concerning to see that the Money Purchase Allowance has also not been adjusted to increase in line with inflation, leaving many over-55s who may have already dipped into their pension for financial support in a restricted situation if they plan to make future pension contributions.
PensionBee would welcome an increase in the Money Purchase Allowance to ensure savers who may have been adversely affected by the pandemic and cost of living crisis are not prevented from future saving opportunities.”
Colum Lyons, CEO at ID-Pal comments on fraud risks attached to the third cost of living payment announced in today’s Autumn budget:
“Where fraudsters see a new ‘government support scheme’, they see an opportunity. We need to be realistic about fraud, and the chances of the Cost of Living Payments, or the Alternative Fuels Payment, being victims of it are high. Covid-19 business support schemes lacked appropriate Know-Your-Customer (KYC) measures, resulting in the UK government losing £4.9bn to Covid loan fraud.
“We must learn from this. By securely handling personal data via robust identity verification, financial supports reach genuine recipients, and not fraudsters.”
Corporate finance and M&A expert, Claire Trachet, comments on the Autumn statement and its implications on startups, tech and M&A:
“The chancellor’s main objective will be to balance the books and bridge the spending deficit, which stands at approximately £50 billion. However, it is the delivery of this which will determine market stability for the coming months. For the UK’s start-up sector, the Autumn statement should be a reverberation of the mini-budget in terms of the highly anticipated expansions to the Seed Enterprise Investment Schemes (SEIS) and tax relief for angel investors – which has been confirmed by the chancellor will stay afoot. It is also crucial to remember that Rishi Sunak is a major advocate for UK tech as a critical source for job creation and economic growth in his Digital Strategy announcement earlier in the year.
“Inflation, the energy crisis and the interest rate increases will continue to economically affect the UK in the short-mid term. However, British firms will continue to receive interest from a flurry of overseas buyers looking to capitalise on a weaker pound and deteriorating valuations. This has its positives and negatives, as on the one side it will attract a great deal of foreign investment to the UK, alongside tax incentives and favourable regulatory conditions. However, low valuations mean UK companies entering potential M&As may get less than they bargain for, so it is a critical moment for the sector here to show resilience.
“I always stress to my clients the importance of being deal ready before heading into any potential transaction. The buyer has shown an interest in your firm at a particular moment in time, but a simple change in external market conditions could lead to them getting cold feet and pulling out. What that means is you need to have done all the necessary preparation before negotiations have started, to ensure the deal gets over the line quickly and smoothly and a failed transaction doesn’t impact the company’s valuation.
“This has never been more important than in the current deals market where the environment can dramatically change over the course of just a few weeks. Another really important thing here is to both sign and close the deal at the same time, as this prevents anything putting the deal in jeopardy in between those two things happening.”
The chancellor’s Autumn Statement has set out plans to stabilise the UK economy and reduce inflation, by announcing around £30bn in spending cuts and £24bn in tax rises. The announcement confirms forecasts which predict the economy will shrink by 1.4% next year as the chancellor acknowledges the UK has officially entered recession. A combination of global factors, with emphasis on the war in Ukraine which has prompted soaring energy and food costs have been cited.
CEO/Founder of business advisory firm, Trachet, Claire Trachet – who’s helped to facilitate over $500m worth of transactions in the past three years – states that a weakened sterling, combined with renewed optimism surrounding new PM Rishi Sunak’s ability to manage the nation’s finances, could result in both the deals market and investment remaining strong in the UK. This is due to the fact that as the pound falls against the dollar, British companies become increasingly cheaper for foreign firms to either invest in, or take over. “For US investors, if things continue the way they are going, it could become something like a garage sale – but one with real value,” explains Trachet.
Melanie Wilkes, Head of Research at the Work Foundation at Lancaster University, a leading think tank for improving working lives in the UK, on the Chancellor’s announcement that 600,000 more people on Universal Credit will need to meet with a work coach:
“We’re concerned that Government is planning to put a greater number of people out of work under pressure to meet Universal Credit requirements.
“This approach ignores the deep challenges that many face in trying to find a job or stay in work. And will be difficult to deliver without significant investment in our employment support services, which are already stretched and under pressure.
“Requiring people – who are unwell, disabled or have caring responsibilities – to meet a work coach and threatening them with the risk of a sanction to their benefits risks doing a great deal more harm than good, particularly in the context of the recession.
“Instead, individuals in these circumstances who want to work should have access to specialist support on a voluntary basis, with no impact on their entitlement to essential financial support.”
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
“As the insidious rise in prices wreaks havoc on household budgets, there will be a big sense of relief that benefits have been uprated with inflation and that a rise in the minimum wage is also on the way. Many have based spending decisions on having this extra benefits income in April to try and make ends meet and the worry that the promise would be whipped away was causing plenty of sleepless nights. A lift in the minimum wage will be another small drop of comfort, but with inflation rising at the 41-year high of 11.1%, it still won’t be deeply felt.
The extra help for households on means-tested benefits in the form of £900 payments comes not a moment too soon. The HL Savings and Resilience Barometer looks at how much cash people will have at the end of the month next summer, assuming the usual uprating, and for those on the lowest incomes the picture was bleak. Among the bottom five deciles – so the lowest-paid half of the country – fewer than one in 100 people thought they would have enough cash left at the end of the month to be considered resilient. Combined these measures will improve their vulnerable situations, but it’s still clearly going to be a tough time ahead for millions of people, until the painful rises in prices subside.’’
Alex Davies, CEO and Founder of Wealth Club said: “However necessary, today’s announcement is brutal for higher earners and investors. Around 250,000 more people will be paying the top rate of tax, many allowances will be frozen until 2028 and the dividend and capital gains tax allowances are being slashed. The good news is there are still plenty of perfectly legitimate ways you can reduce the tax you pay, from investing in pension and ISAs to crystallising capital gains liabilities now rather than next year. If you are prepared to take more risk, consider investing in early-stage businesses through VCTs, EIS and SEIS. Not only are they very tax efficient, but also your money goes to entrepreneurial companies, which is great for economic growth and job creation.”
- Use your ISA allowance
Individuals can save £20,000 into their ISA each year. Any income and capital gains generated from within the ISA are free of income and capital gains taxes, although investors should still watch out for inheritance tax.
- Use your Capital Gains Tax Allowance
Currently, Individuals have a £12,300 annual capital gains tax allowance, meaning investors can make £12,300 in capital gains before becoming liable for capital gains tax. This allowance drops to £6,000 from April 2023, and to £3,000 from April 2024. The message is clear, use it or lose it. Investors in funds who are happy with their portfolio could consider selling a fund that’s performed well and buying something very similar, for instance you sell one US equity tracker and buy another.
- Use your pension
Higher and additional rate taxpayers will breathe a sigh of relief to see pension tax reliefs are unchanged. Saving into a pension remains the go-to tax-efficient savings vehicle. Receiving pension tax relief at one’s marginal rate of income tax means topping up a pension by £100 costs a higher rate taxpayer £60, and £55 for an additional rate taxpayer. This generous relief may not be around forever, so make sure to use it while you can. Beaware of the Annual Allowance and Life Time Allowance before investing.
- Look beyond pensions and ISAs to save up to 50% income and capital gains tax
Pensions and ISAs are great, but the allowances can be restrictive for some. To mitigate this, if you’re prepared to take extra risk, you could look to the government’s venture capital schemes. Each offers a different mix of tax benefits. Which you go for will largely depend on circumstances and how much risk you’re prepared to take. As a rule of thumb, the greater the tax benefits, the higher the risk.
- Venture Capital Trusts (VCTs) offer up to 30% income tax relief. Returns are paid through regular tax-free dividends, which is a nice bonus. The allowance is a very respectable £200,000 a year.
- Enterprise Investment Scheme (EIS) investments also offer up to 30% income tax relief. There are no tax-free dividends, but one bonus here is that you can also defer chargeable capital gains you’ve realised. For as long as you stay invested in any EIS, you can forget about the CGT bill. It will only become payable once you come out of the EIS, unless you re-invest the money into another. The allowance is a whopping £1 million a year or £2 million if you invest at least £1 million into “knowledge intensive” companies.
- The Seed Enterprise Investment Scheme (SEIS) is the real winner when it comes to tax savings. When you invest you can cut both your income and capital gains tax in half. The allowance is a more modest but still extremely generous £200,000. A £200,000 investment could save you up to £100,000 income tax plus £28,000 capital gains tax.
- Protect as much as possible of your portfolio from IHT
Pensions can be passed on to the next generation relatively tax efficiently. EIS and SEIS investments should be IHT free after two years too. The greatest IHT threat probably comes from where you least expect it: your ISA. Contrary to what many think, ISAs are not IHT free. So, if you do nothing, up to 40% of your fund could eventually be eaten up by tax. An alternative is to invest in an AIM ISA, a managed portfolio of AIM shares that can be IHT free after two years. You still get the ISA benefits of tax-free income and growth for as long as you live, but you don’t need to worry about IHT on top.
| How do ISA, pensions, VCT, EIS and SEIS tax reliefs compare? | |||||||
| Maximum Investment | Income Tax Relief | GGT Relief/Deferral | Tax-free dividends | Tax-free growth | IHT relief | Loss relief | |
| ISA | £20,000 | No | No | Yes | Yes | No | No |
| AIM ISA | £20,000 | No | No | Yes | Yes | Yes (after two years) | No |
| Pension | £0 to £40,000* | up to 45% | No | Yes | Yes | Yes | No |
| VCT | £200,000 | up to 30% | No | Yes | Yes | No | No |
| EIS | £2,000,000 | up to 30% | Deferral | No | Yes | Yes (after two years) | Yes |
| SEIS | £200,000 | up to 50% | 50% relief | No | Yes | Yes (after two years) | Yes |
*Depending on circumstances. Annual allowance for higher earners as little as £4,000.
Dr Henry Balani, Head of Industry and Regulatory Affairs at Encompass Corporation, comments:
“It’s encouraging that the Chancellor recognised the value of innovation and technology, and that the government will continue to support its growth with increased public funding for research and development, and to better integrate technology and science with an already world-class financial services industry in order to turn Britain into ‘the world’s next Silicon Valley’.
“This is certainly an ambitious, but not entirely unreasonable, goal. Achieving it will require businesses, regulators and decision-makers to be fully aligned on fostering cutting-edge innovation at the highest level. Many businesses will need to overhaul internal infrastructures, which will mean equipping themselves with state-of-the-art cloud technology and tools powered by automation, to drive success now and in the future.
“It was also crucial to hear that changes to EU regulation across digital, finance, advanced manufacturing, life sciences and green industries will take place by the end of 2023. This approach should allow the UK to refine regulations so that they more appropriately address its unique market requirements, and simultaneously support innovation without hindering the financial landscape.”
Sarah Coles, senior personal finance analyst:
“This budget faced the challenge of a Ninja in hobnail boots. In order to appease the Bond markets, Jeremy Hunt had to clatter down the corridors of power, meting out hefty blows on all sides, delivering all the festive joy and financial pain of Hans Gruber without memorable one-liners. Meanwhile, in order not to upset the political applecart, he had to do it with enough stealth to escape the notice of significant numbers of voters. As a result, we have stealth taxes galore, accompanied by significant tax raids on everyone from higher earners to investors and entrepreneurs.”
Susannah Streeter, senior investment and markets analyst:
‘’Jeremy Hunt has continued to steady the ship through the turbulent waters of a cost-of-living crisis, sailing away from the market mayhem which erupted with the previous Chancellor at the helm. The journey ahead will be far from smooth, with the economy forecast to shrink by 1.4% next year, a grim outlook which is partly behind the retreat in sterling which has fallen by more than 1%. But there is some relief that the outlook from the Office for Budget Responsibility indicates that the downturn may end up being shallower because of the measures being introduced. ‘’
Sarah Coles, senior personal finance analyst:
“Stealth taxes mean that long after the fuss of the Autumn Statement dies down, the taxman will be quietly picking your pocket for years to come.
Income tax bands were already frozen to 2026 and will now be frozen to 2028. We don’t tend to notice stealth taxes, because they only kick in as we get a pay rise. It means we lose more of our extra pay – so we’re never actually worse off in nominal terms. Of course, once you take inflation into account, it’s another matter entirely, and the taxman taking an extra slice leaves us with an even harder struggle to make ends meet.”
Helen Morrissey, senior pensions analyst:
“Inheritance Tax (IHT) used to be seen as a wealthy person’s tax, but a mix of booming house prices and threshold freezes mean this is no longer the case. This latest freeze will only make matters worse. Inheritance tax (IHT) receipts received by HMRC during the financial year 2021/22 were at an all-time high of £6.1 billion, with estates over this level facing eye watering 40% tax bills.”
Helen Morrissey, senior pensions analyst:
“After weeks of speculation about whether the triple lock would return next year many pensioners will be viewing today’s news with a sigh of relief. A 10.1% increase along, with the extra cost of living payments of £300, will be hugely welcome for pensioners struggling to keep up with their bills.
The decision to uprate Pension Credit by 10.1% comes as a welcome surprise and will boost the income of single pensioners to around £201 per week. They will also be in line for cost-of-living payments of £900.
However, it’s also worth saying that this increase will only come into effect from April so there is a tough winter ahead. The reinstatement of the triple lock after its suspension last year will cool some of the discussion around its long-term viability for a while, but with a review of state pension age due to be published soon, now is the time to carry out a comprehensive review of the state pension to ensure it best helps those who need it most, both now and into the future.”
Sarah Coles, senior personal finance analyst:
“The new energy support package will come as a relief for average earners, who were worried they might be left out in the cold. The new package, from April, will keep bills at £3,000 for average users – protecting them from a rise to as much as £3,700. This still leaves them with a horrible mountain to climb, and the fact that this comes on top of so many other price rises means life will be even tougher next spring.
The rise would be an impossible challenge for those on lower incomes, so the additional support payments from the government are absolutely vital. However, even at this level there will still be enormous number of people facing impossible choices.
Across the board we can expect more people to run into real difficulties. Given that we will be going through a recession at this point, it means that those who have found it difficult to manage in 2022 could run into a brick wall financially next year.”
Sarah Coles, senior personal finance analyst:
“Property buyers will have been thrown into a quandary by the announcement that the stamp duty cut will be reversed in 2025. This could be a useful short-term boost to the market. By moving from an open-ended stamp duty cut to a limited opportunity, it could hurry through more sales, and help to keep the market ticking over until March 2025
But this may not be the best outcome for buyers. Right now, the market is sending out every possible signal that they might want to hang fire, because we could be reaching the peak, but the desire to save tax could force them to buy sooner than they otherwise would, and expose them to the risk of property price drops. Meanwhile, if they decide to hold on for the bottom, they could end up rushing for the end of the stamp duty break along with so many others that they end up paying over the odds.”
Susannah Streeter, senior investment and markets analyst:
“Entrepreneurs are being penalised with the increase in taxes on both capital gains and dividends, and those people who have diligently invested over the long term to build up their financial resilience will no doubt feel unfairly swiped by this grab from profits.
Investors who hold money in funds or shares outside a pension or an ISA will face a greater tax burden, which is a reminder of the value of ISAs in protecting investors from having to consider CGT or dividend tax. However, there is a risk that the government may still end up receiving less in tax because investors hoard assets.
For buy-to-let investors who own property as part of a limited company these changes could be a triple whammy, coming on top of rises in corporation tax. They will not only have to pay more tax on dividends on profits from rent but now that CGT has been aligned with interest rates and they sell up, they could be faced with a hefty bill in just one hit. This could discourage them from selling, causing parts of the housing market to potentially seize up.”
| Capital gains tax changes for a basic rate taxpayer | |||||||
| New non-residential | New non-residential | Change | New Residential | Old Residential | Change | ||
| £10,000.00 | £400.00 | £0.00 | £400.00 | £720.00 | £0.00 | £720.00 | |
| £30,000.00 | £2,400.00 | £1,770.00 | £630.00 | £4,320.00 | £3,186.00 | £1,134.00 | |
| Capital gains tax changes for a higher/additional rate taxpayer | |||||||
| New Non-residential | Old Non-residential | Change | New residential | Old residential | Change | ||
| £10,000.00 | £800.00 | £0.00 | £800.00 | £1,120.00 | £0.00 | £1,120.00 | |
| £30,000.00 | £4,800.00 | £3,540.00 | £1,260.00 | £6,720.00 | £4,956.00 | £1,764.00 | |
