The chancellor, Jeremy Hunt, pressed the button for a new wave of austerity in an autumn manifesto that will end eight years of improving living standards.
Hunt left the three main tax rates unchanged – 20p base, 40p top and 45p additional rate – with the first £12,750 income tax and a 40% rate starting at £50,270. However, it has lowered the threshold at which Britons start paying the top rate of 45p income tax to £125,140 – a measure that would drag 250,000 people up to the top rate.
In the spring 2021 budget, the then finance minister, Rishi Sunak, froze personal tax thresholds for four years, which began in April. Over time, this leads to more low-income households paying base rate tax (which comes out to £12,570) and those with incomes close to £50,000 to the higher 40% rate. Hunt has now gone even further, by prolonging this deep freeze by another two years, which means no change until 2028.
However, state pensions and benefits will rise by 10.1% from April, in line with the rate of inflation in September, and the ‘national living wage’ for those over 23 will increase from £9.50 an hour to £10.42.
This budget was short of good news for Britons struggling with rising food, energy and borrowing costs. The chancellor is also facilitating a 5% council tax increase in a bid to boost local authorities’ finances, which will put more pressure on family budgets next year.
Genevieve Morris, head of corporate tax at Blick Rothenberg, called it budget “The frog boils.” “The constant freezing of the taxa means that most people won’t notice it directly as the temperature rises, and so they won’t jump out of the water. They will simply discover years after boiling.”
This is how the announcement of the Fall Manifesto will affect different families.
One person
He earns £38,000
2022/23 You earn a national average wage of £38,000 and pay £5,084 per annum in income tax and a National Insurance bill of £3,248. Her monthly wage is £2,489 after tax. She also got £400 in help from the government with her energy bill.
2023/24 The frozen tax caps will have no immediate impact on the household paycheck and the annual National Insurance bill will drop by £196 after the increase in contributions this year is scrapped in the middle of the year. There will be no energy bill subsidy throughout this year and she is facing higher bills because the price cap has risen by £500 to £3000. Overall, it’s the worst £200.
Single mom, two kids
He earns £11, oo
2022/23 Her low salary means she doesn’t have to pay income tax or National Insurance, so she gets £917 a month. You get £680 Comprehensive Credit payment per month and £144 Child Benefit. She received a sum of £650 towards cost of living.
2023/24 Her pay that she received in the fall statement has not changed. You will receive £800 Universal Credit and £160 Child Benefit. As she claims tested benefits, she will receive a £900 cost of living payment. Overall, she is better off at £1,882.
An unmarried couple in their 30s
The first income is £55,000 and the second income is £35,000
2022/23 The couple pay a total of £13,913 in income tax and £7,763 in National Insurance each year. This results in a combined monthly income of £5,694 after tax.
2023/24 The declaration of the fall statement does not change the amount of income tax that spouses must pay. Once again, their National Insurance bill would fall, meaning they would be £453 better off until they get a wage increase to cover accelerating inflation, which would cause their tax bill to rise. They also lose out on an energy bill subsidy of £400.
An unmarried couple with two children, one of whom has special needs
Single income of £23,000, with a full time carer partner
2022/23 The home breadwinner’s wage is £1,639 per month after tax. They are eligible for £756 Universal Credit, £145 Childcare Allowance and £279 Care Allowance each month. Disability living allowance for their child is £628 a month, and they’ve got £800 for cost of living. This resulted in a total income of £42,164.
2023/24 The monthly benefit payments to the family will increase. They will receive £954 in Universal Credit, £160 Child Benefit, £308 Care Allowance and £692 Disability Living Allowance. The family will also receive an amount of £1,050 towards the cost of living. This works out to £46,086.
Married and has three children
Single income £57,000
2022/23 The working parent pays £9,976 per annum in income tax and £4,934 in National Insurance. This translates to a monthly income of £3,508 plus £60.84 per month in child benefit.
2023/24 This family would see the amount of child benefit they receive increase, rising by £1.53 to £16.74 per week or £67 per month. Their National Insurance bill was reduced by £275 to £4,658. If they receive less than £50,000 they will be able to keep all of their children’s benefits. Overall, they are £355 better.
They are married and both are disabled
2022/23 The couple receive £880 Universal Credit and a Joint Personal Independence Payment (Pip) of £243 per month, plus £800 towards the cost of living.
2023/24 The couple will receive a £1,050 cost of living payment due to their disability and the fact that they claim tested benefits. Their comprehensive credit payment will rise to £969 a month, and the point will rise to £268. Overall, they fare better at £1,681.
couple
The first income is 150,000 pounds and the second income is 85,000 pounds
2022/23 These two high-earning couples pay £73,888 in income tax each year, and £12,791 in National Insurance contributions, which were higher in the early part of the financial year. Their combined monthly wage is £12,360.
2023/24 After the budget, the income tax bill rose by £1,243 to reflect a drop in the rate at which extra rate tax is paid to £125,000. This increases the couple’s income tax bill to £75,131, but their National Insurance contributions are £1,054 less at £11,737, leaving their income almost unchanged.
The only pensioner who receives a state pension also receives a pension
2022/23 His state pension is £141.85 a week or £567 a month, and he gets an extra pension of £40.75 a week, or £163 a month. He has qualified for a £950 cost of living payment.
2023/24 This retiree will benefit from a 10.1% increase in benefits. He would now get a basic pension of £156 a week, or £624 a month, and an annuity of £179. He will receive a cost of living payment of £1,200. Overall, it’s a better £1,209.
Married retirees in their 70s
State pension plus a private pension of £8,000
2022/23 Half of this couple receive a basic state pension of £142 per week, plus a private pension of £154 per week. The other has a weekly government pension of £85. They pay £307 income tax on the private pension and have received a £300 living pay.
2023/24 They were £1044 a year better off after the Autumn Manifesto, owing to the rise in the State Pension. They will also receive a further £300 as a living pay.
couple
One is the director of a small business whose company is making £40,000 after expenses. You receive a salary of £9,100, pay company tax on the remaining amount and receive a dividend payment of £25,029. And her wife is a teacher who earns £30,000.
2022/23 The couple pays £3,484 income tax on the teacher’s salary, £2,254 on National Insurance, £5,871 corporation tax and £1,957 income tax on dividends. They get a take home wage of £56,433 a year.
2023/24 Changes to the profit tax rule mean the couple are in a worse position as they must pay £2,042 income tax on the company’s profits. The teacher’s National Insurance bill drops to £2,092, so their combined income is virtually unchanged, at £56,511 a year.