Employment Insight – Autumn Statement 2022

18 November 2022

It has been a rollercoaster 2 months in the UK, with tax cuts announced, tax cuts abandoned, the crash of sterling, predictions of the longest recession in the UK since records began, and 3 Prime Ministers in an 8 week period.

Against this backdrop our new Chancellor presented his Autumn statement yesterday in which there was some news for employers:

  • The legally-enforceable minimum wage for people aged over 23 will increase from £9.50 to £10.42 an hour from April 2023
  • State pension payments and means-tested and disability benefits will increase by 10.1%, in line with inflation
  • The top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000 - this being a sharp divergence from the Truss government's plan to scrap the 45% rate
  • Income tax personal allowance and higher rate thresholds will be frozen for further two years, until April 2028
  • Tax-free allowances for dividend and capital gains tax are also due to be cut next year and in 2024
  • The UK's inflation rate is predicted to be 9.1% this year and 7.4% next year
  • Unemployment is expected to rise from 3.6% to 4.9% in 2024 (although news reports have suggested it will be double this)

Some measures previously announced under the Truss government have already been unwound, including:

  • The 2021 IR35 reforms will be retained, not revoked, meaning that companies that engage contractors via an intermediary (such as a personal service company) are responsible for assessing (and, potentially, deducting) tax
  • There will be no cut in the basic rate of income tax

Whilst others have been retained:

  • The Government intends to remove the cap on bankers' bonuses
  • The National Insurance (NI) increase which took effect in April 2022 under Boris Johnson's government has already been reversed, with the previous rate of NI being restored as of 6 November.

Many of the measures had been well trailed in the press and, overall, the news is not as bad as many had feared. However, with a bleak overall economic outlook many employees will be looking to their employers to support them both financially and through wellbeing programmes for the foreseeable future.

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