Autumn statement 2022: what it means for your pay, tax, benefits and energy bills

The Autumn Statement 2022 announced on 17 November by Chancellor Jeremy Hunt makes sweeping changes to pay, tax, benefits and energy bills

Before the Autumn Statement Hunt had already reversed income tax cuts and limited energy support in the emergency plan announced on 18 October, with only the stamp duty changes and cut to national insurance remained intact.

Here we explain what the Autumn Statement means for you, your money and your bills.

Autumn Statement 2022

• Autumn Statement 2022: energy bill hikes explained
• Autumn Statement 2022: tax changes explained
• Autumn Statement 2022: pension changes explained
• Autumn Statement 2022: new cost of living payments explained
• Autumn Statement 2022: benefit changes explained 

Energy Price Guarantee extended

Help with energy bills will be extended from April next year but it will be a lot less generous.

The Energy Price Guarantee will increase in April 2023 to cost the average household £3,000 per year, and run until April 2024. Protecting households from bills which could have hit an average of £3,700 or more. 

But this winters £400 Energy Bill Discount will not continue, so in reality the average household will face a £900 hike in energy bills. 

But remember it is only the unit price of energy that is frozen so the more energy you use, the higher your bills will be

The windfall tax on the profits of oil and gas firms will also be increased from 25% to 35% and it will be extended until March 2028.

Income tax: pay more tax via a stealth increase

Top earners will also pay more tax, with the additional tax rate (45%) threshold being brought down to £125,140 from £150,000.

Income tax and National Insurance thresholds will be frozen until 2028. 

It means the point at which you start paying 20% tax will be frozen at £12,570, while the threshold for paying higher-rate tax (40%) will stay at £50,270.

Most of us see our wages go up each year so that they keep up with inflation – wage growth is currently 6%, according to the Office for National Statistics. But unless tax bands increase at the same time, many workers will find themselves dragged into a higher tax band by stealth - and end up paying more income tax. 

If there’s 5% wage growth this is how much more tax you’ll pay each year because of frozen tax thresholds, according to analyst Quilter:

The main National Insurance thresholds will also be frozen for two more years, until April 2028.

National living wage rise

The National Living Wage will be increased from £9.50 an hour for over-23s to £10.42 from April next year. 

While it's a big increase it is still below the Living Wage Foundation's real living wage of £10.90.

Cost-of-living payments for the 8m households on means-tested benefits

Cost-of-living payments for the 8m households on means-tested benefits

The government announced a second round of cost of living payments - giving the most vulnerable 8 million households on means-tested additional payments of £900, £300 to pensioner households and £150 to people on disability benefits. When and how these payments will be made has not yet been announced. 

State pension to rise in line with inflation

The state pension will rise in line with inflation (10.1%).

Benefits to rise in line with inflation

Payments for the following means tested benefits will go up 10.1%:

• Universal Credit
• Child benefit
• Contributory employment and support allowance
• Contributory jobseeker's allowance
• Income-based jobseeker's allowance (JSA)
• Income-related employment and support allowance (ESA)
• Income support
• Working tax credit
• Child tax credit

Inheritance tax threshold frozen

The Chancellor has extended a freeze on the inheritance tax (IHT) threshold.

Currently, if the deceased's estate, including assets such as money, property or shares, is less than £325,000 then no IHT is payable. 

And if the deceased person leaves their property to direct descendants they are entitled to an extra £175,000 without paying IHT, enabling the estate to pass on £500,000 tax-free. 

On top of that, if the allowance is unused, a surviving spouse or civil partner can pass on assets worth £1m without paying IHT, which is normally charged at 40%.

That threshold had already been frozen until 2025-26, but it has now been extended until 2027-2028. 

It means more people will have to pay inheritance tax, while others who would already pay some IHT will have to pay more.

Capital gains tax: pay more when you sell a second property or shares

Right now, everyone has a yearly allowance that lets them sell assets such as a second property or shares with the first £12,300 free of capital gains tax (CGT).

For example, if you sell a second property for £200,000, having previously bought it for £140,000, you will have made a profit or ‘gain’ of £60,000. After the annual allowance of £12,300 is taken off, this taxable gain falls to £47,700. If you’re a basic rate tax payer you’ll pay 18% on that - if you’re a higher rate tax payer you’ll pay 28%.

If you sell stocks and shares, you’ll pay CGT in the same way: 10% if you’re a basic rate taxpayer and 20% if you’re a higher rate and additional rate taxpayer.

The Capital Gains Tax free thresholds will be cut from £12,300 to £6,00 in 2023 and then £3,000 in 2024.

Dividend tax: the self-employed and investors to pay more

The Government will cut the tax-free allowance for dividends from £2,000 to £1,000 in 2023 and then to £500 in 2024.

The move affects hundreds of thousands of freelancers, small business owners and contractors who pay themselves through dividends and investors who receive dividend payments from their investments outside of an Isa.