If you pay into a UK state pension and/or declare part of your income in the country, you may be affected by some of the measures announced in the ‘Autumn Statement’ budget yesterday (November 17).
The budget included wide-ranging tax rises and spending cuts, in a difficult economic context of rising food and energy prices and the highest inflation rate – 11.1% year-on-year last month – in more than 40 years.
The country is facing a recession set to last until mid-2024, its longest on record, the Bank of England stated earlier this month.
Yesterday’s budget reversed many measures from September’s controversial ‘mini budget’.
Changes to income tax, pensions and stamp duty
- Firstly, if you pay UK income tax, then you will be affected by a freeze on the personal allowance – the first tax-free band before UK tax is payable.
It is currently £12,500 and will remain at this level until April 2028, the Chancellor of the Exchequer announced yesterday. This means more people are likely to become taxable where they were not before, and others will pay more tax, as overall incomes increase but the allowance stays the same.’
- If you pay voluntary National Insurance contributions to top up your right to a UK state pension, then the payments are set for a steep hike at the start of the 2023-2024 UK financial year.
They are currently £3.15 a week for class 2 and £15.85/week for class 3. These are set to go up in line with a 10.1% hike in the consumer price index in September this year, to £3.45 and £17.45.
Class 2 contributions are payable by people who used to work in the UK immediately before moving abroad and had previously lived in the UK for at least three years in a row or paid at least three years of contributions. Class 3 are for those living abroad and not working.
- If you already claim a pension, there is some good news as the Chancellor confirmed that the government would not be changing the state pension ‘triple lock’ mechanism, which means that due to high inflation the pension will rise next year, also by 10.1%.
This will see the ‘new’ state pension (for those claiming since before April 2016), currently worth £185.15 a week, go up to £203.85. The basic state pension, for those who reached state pension age before April 2016, is currently £141.85 a week, and will go up to £156.20.
- High earners will enter the bracket to pay ‘additional’ income tax at a lower level from April 6, 2023. The threshold will be £125,140 as opposed to £150,000.
- The budget maintains a doubling of the ‘nil-rate’ threshold for payment of stamp duty for property purchases, which was announced in September. These measures, however, previously announced as ongoing, are now set to end by April 2025, the Chancellor said.
Anyone buying residential property in England and Northern Ireland will not pay this land tax up to a price of £250,000, compared to £125,000 before.
First-time buyers get additional relief with the price they start to pay stamp duty set at £425,000, as long as the overall property price is below £625,000, up from £300,000 and £500,000. However, this benefit only concerns people buying a property as their main home.