He and prime minister Rishi Sunak are trying to plug the “fiscal black hole” at the heart of public finances. It comes as inflation reaches 11.1% and the country having already entered a recession in the wake of the disastrous unfunded tax cuts in the mini-budget.
Taxes as a proportion of the UK’s national income will increase by just over 1% over the next five years – but it will still mean we are facing the highest tax burden for at least the last seven decades.
The Office for Budget Responsibility also estimates that there will be around 3.2million extra taxpayers as a result of the budget.
So, here’s a breakdown of all the jargon, an explanation what this statement means in real terms for your finances – and why critics claim we’re in a “doom-loop”.
Energy bills
The Energy Price Guarantee will now stay in place until March 31, 2024.
The scheme meant that the government would make sure the average household only pays around £2,500 for their annual energy bill.
However, from April 2023 rates will be increased by 20% (so the average bill will cost around £3,000).
If the total cost of energy decreases though, price caps will reduce too.
Without the government’s backing, it’s thought that people could be paying up to £3,700 per year for energy by now.
Hunt also announced that much of this funding would come from an increased windfall tax. This is the tax North Sea oil and gas firms have to pay on excess products.
Now, it will go up from 25% to 35% from January 1 next year – a measure which will stay in place until March 2028.
It will apply to electricity generators too, through a temporary 45% levy.
Together, this should raise £14 billion, according to the chancellor.
Benefits
All means-tested benefits will rise in line with September’s 10.1% inflation rate (including Universal Credit) from next April.
Hunt said: “That is an expensive commitment costing £11 billion, but it means 10 million working age families will see a much-needed increase next year.”
The chancellor explained that the average family on Universal Credit will see a benefit of around £600 per year as a result.
But, as the BBC points out, some disability benefits need to rise with inflation every year anyway.
Cost of living payments
Cost of living payments for those on low incomes, disability benefits and pensioners will come back again in 2023.
There will be an increase in support for those on benefits, as it will climb from £650 this year to £900.
Payments for state pensioners and those on disability payments will stay as they currently are, £300 and £150 respectively.
Social care
The increase in social rents has been capped at 7% – according to MoneySavingExpert Martin Lewis, this was scheduled to be capped at 11.1%.
Even so, this will work out to a saving for the average tenant of £200 next year, according to Hunt.
The lifetime cap on social costs in England, set to kick in in October 2023, has also been delayed by two years.
Pensions
Pensions will rise by 10.1% from April, like benefits. This is in line with the inflation rate seen in September of 10.1%.
It has since risen to 11.1%.
Even so, Hunt said the government was going to stay by its promise to the “triple lock” on state pension. This is a Tory manifesto pledge that state pension would increase with whichever one of these is the highest: the previous September’s inflation figure, the average wage increase, or 2.5%.
So the state pension will be £10,600 a year now – and a typical energy bill is worth 30% of that.
National living wage
For over-23s, it will increase from its current rate of £9.50 an hour to £10.42 from April next year.
This works out to be an annual pay rise akin to more than £1,600 for a full-time worker, according to Hunt.
This wage goes up every April, increasing the pay of around two million people in the UK.
Top rate of income tax
The 45p threshold will be reduced from £150,000 to £125,140.
In other words, this means more people will pay more tax, as long as they earn more than £125,140 per year.
Basically, that means tax bands will stay the same even as people’s pay goes up – so a higher proportion of earnings paid on tax will climb too.
So millions more will pay more in tax.
These thresholds will be frozen until 2028, too.
Capital gains tax
This is the amount you can earn on investment profits without paying tax, reduced from £12,000 to £8,000 from April 2023.
From April 2024, this will fall further.
Stamp duty tax cut
This is set to be reversed in 2025.
Currently, you pay no stamp duty until property costs £250,000 or more (this limit is at £400,000 for first-time buyers). But in 2025 it will go back to £125,000.
For first-time buyers, it will still be higher – £300,000.
Higher mortgage rates are already adding another pressure to homeowners as well, as the Bank of England has made the cost of borrowing more expensive.
Council tax
There will also be a £100 rise for a typical Band D property, meaning its total will go over £2000 for the first time.
As shadow chancellor Rachel Reeves pointed out: “Local people…will be forced to pay more because of the destructions the conservatives have wreaked on the economy.”
Electric vehicles
Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 so that the motoring system is “fairer”, adding another extra cost on for households.
What about other taxes?
The thresholds for personal allowance, National Insurance, higher rate tax and, inheritance tax will be kept in place until April 2028.
Meanwhile, tax-free allowances for dividend tax is to be cut from £2,000 to £1,000 next year before going down to £500.
So, what does this mean overall for our finances?
We will have to pay more tax.
As Labour’s Reeves said, energy bills rising next Spring still means “far too many” will be “wondering how they’ll make ends meet” – while the Tories have stuck the UK in a “doom-loop” of public spending cuts.
Hunt also did not change non-domicile tax rules which allow some people to pay tax in the UK only on their income in this country, and he is still planning to lift the cap on bankers’ bonuses.
Reeves pointed out that frozen tax bands at a time of double-digit inflation means £600 will be taken away from the average person, too.
