Following the dismantling of the previous chancellor’s policy of tax cuts to fund growth, Jeremy Hunt warned that the UK economy had already entered recession.

The economy will return to pre-pandemic levels at the end of 2024, the Office for Budget Responsibility has said, nearly three years later than the fiscal watchdog estimated in March.

Here we outline some of the main announcements likely to affect your own personal finances:

Income Tax

Although he kept headline rates of tax flat, the chancellor reduced the threshold at which the top 45p rate becomes payable from £150,000 to £125,140.

This will see an increase in tax of just over £1,200 tax per year if you earn over £150,000. The tapering of the tax-free Personal Allowance means those with earnings  from £100,000-£125,140 are effectively taxed at 60%. Then at 45%. Pension contributions & other tax-efficient investments (ISAs, Venture Capital Trusts, Enterprise Investment Schemes) will become even more important.

With thresholds also frozen, this will be an effective tax increase for many as they are pushed into different brackets over the next 5-6 years.

Capital Gains Tax threshold reduced to £3k by 2024

Currently, the Capital Gains Tax (CGT) annual allowance is £12,300. CGT is payable on profits over that figure – at 10% or 20% – plus an additional 8% if the gain is from residential property.

From next year, the CGT allowance will halve to £6,000. From April 2024, the allowance will halve again, from £6,000 to £3,000. This will bring more people into tax reporting and increase the administration burden.

Tax-free allowance for dividends

The dividend allowance will be cut from £2,000 to £1,000 next year. From April 2024, it will then be reduced to £500.

This will affect you, if hold income-paying shares outside tax wrappers like ISAs and pensions, as well as costing limited company directors who are remunerated through dividends.

Inheritance Tax

Rishi Sunak previously froze the threshold at £325,000 until April 2026 when he was chancellor. Hunt has now extended this until April 2028.

More and more families will have taxable estates over the next few years. IHT planning remains key for preserving your legacy.

EIS and VCT pledge

Jeremy Hunt has kept Kwasi Kwarteng’s pledge to extend the enterprise investment scheme (EIS) and venture capital trusts (VCTs) beyond 2025.

If you have maxed out your pension and ISA allowances, you could look to these schemes, which offer generous tax reliefs designed to encourage investment in unlisted companies.

Pensions ‘triple lock’ reinstated

The triple-lock on the state pension was reinstated, meaning a 10.1% boost for pensioners next April.

The full annual amount of the new state pension will rise above £10,000 for the first time next year and will be worth over £200 per week.

Cost of living

Benefits will rise in line with inflation from April 2023.

The energy price guarantee will be extended for 12 months from April 2023 to assist struggling households and businesses. This means unit prices will be capped so average bills are no more than £3,000. Currently, the energy price guarantee caps energy bills for the average home at £2,500 per year.

To help the most vulnerable, additional Cost of Living Payments will be made to households on means-tested benefits (£900), £300 to pensioner households, and £150 to individuals on disability benefits.

The government is setting a national ambition to reduce energy consumption by 15% by 2030.

Stamp duty

There were no changes to stamp duty — one of the few “mini” Budget measures to have survived intact.

However, the chancellor said these measures will only remain in place until the end of March 2025.

Other measures:

Electric vehicles

Electric vehicles will be taxed to make it “fairer” but this risks slowing down the uptake of electric vehicles and doesn’t marry with the commitment to lower CO2 emissions.

City of London reform

Reform of Solvency II rules will allow insurance firms to release billions of pounds of capital to invest in green energy and other infrastructure projects.

As usual, the devil is in the detail. The team at EQ will continue to review the changes and their impacts over the coming days and weeks.

Please do get in touch if you have any questions or would like more information.