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Income tax rates and thresholds
The Chancellor extended the freezing of nearly all income tax and national insurance thresholds for a further two years, to 5 April 2028.
For income tax, this includes the personal allowance at £12,570 and the rate at which individuals pay 40% tax (33.75% for dividends) at £50,270.
The policy did not extend to the additional tax rate, previously set at £150,000, which from 5 April 2023 will decrease to £125,140. Individuals with taxable income exceeding £125,140 will pay income tax at 45% on non-savings and savings income and at 39.35% on dividend income.
The £125,140 threshold now aligns with the full withdrawal of the personal allowance for individuals whose taxable income exceeds £100,000.
Mr Hunt indefinitely delayed the decrease of the basic rate of income tax from 20% to 19%. The basic level of income tax will remain at 20% for the foreseeable future.
Whilst all tax rates remained the same, the Chancellor announced a reduction to the tax-free dividend allowance from the current £2,000, to £1,000 from 6 April 2023 followed by a further reduction to £500 from 6 April 2024.
The dividend rates are set to remain at the rates announced in the wake of the mini-Budget of 8.75%, 33.75% and 39.35%.
National insurance rates and thresholds
As expected, the Autumn Statement confirmed the reversal of the temporary increases to the national insurance rates of 1.25% which have been in place since 6 July 2022. The rates for class 1, class 1A, class 1B and class 4 national insurance contributions have decreased back to the 2021/22 rates with effect from 6 November 2022, whilst the additional 1.25% Health and Social Care levy has been completely scrapped.
It was also announced that all national insurance thresholds will be frozen, with the lower earnings limit and small profits threshold frozen until April 2024 and all other thresholds frozen until 5 April 2028; an extension of a further two years on what had been announced in the spring.
The Autumn Statement fixes the national insurance secondary threshold at £9,100 until April 2028.
Inheritance tax
Inheritance tax saw a threshold freeze with the nil-rate band and residents nil-rate band frozen at their current rates of £325,000 and £175,000 until 5 April 2028.
The residence nil-rate band taper threshold was also frozen at its current level of £2 million. Therefore, a qualifying individual’s estate valued below £2 million will benefit from no IHT charge on the first £500,000 of assets (£1 million if using a deceased spouse’s unused band).
National living wage and national minimum wage
The Government announced an increase in the national living wage from 1 April 2023 of 9.7% which raises the hourly rate for over 23-year-olds from £9.50 to £10.42.
The national minimum wage will also increase from April 2023:
| Age |
Increase |
Hourly rate |
| 23+ |
9.7% |
£10.42 |
| 21-22 |
10.7% |
£10.18 |
| 18-20 |
9.7% |
£7.49 |
| 16-17 |
9.7% |
£5.28 |
| Apprentice |
9.7% |
£5.28 |
In addition, the accommodation offset rate will increase by 4.6% to £9.10 per hour.
State pension
To protect the most vulnerable, the Chancellor announced an increase in state pensions in line with current inflation rate of 10.1% from April 2023, maintaining their ‘triple lock’ commitment.
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