What does the budget mean for me?

How today's announcements affect social workers and those they support
Calculator by recha-oktaviani

Published by Professional Social Work magazine, 17 November 2022

So, what does the autumn statement mean for social workers and their personal finances, and the finances of those they support?

Our guide below explains the main changes and how they will impact household budgets across the land…

Personal Tax

The decision to freeze income tax thresholds means three million extra people could be pushed into higher tax payments by 2026.

For those who get a pay rise, they will end up paying more in income tax because they may end up in a higher tax bracket.

A person earning £12,000 now could earn £13,000 in the future, meaning they will start to pay the lowest tax threshold of 20 per cent on some of their earnings. Higher earners and shareholders will also be hit by changes to the top tax threshold.

Tax changes in full:

  • Income Tax thresholds for lower earners have been frozen at £12,570 and £50,270, in a stealth tax hike
  • The 45p top tax threshold has been reduced from £150,000 to £125,000
  • High earners are also hit by the removal of the top 45p threshold for Income tax
  • Inheritance tax thresholds have been frozen for two years
  • The dividend allowance will be slashed from £2,000 to £500 by 2024
  • Capital Gains tax allowance will be slashed from £12,000 to £3,000

The Office for Budget Responsibility predicts a seven per cent drop in household disposable income, wiping out a decade of earnings growth.

The collapse will occur due to high inflation and energy bills, with tax rises adding to the pressure on average homes.

By 2024 disposable income goes back to the level it was at in 2013 – meaning households will have far less money to budget with.

Economic growth is predicted to slow, and unemployment forecast to rise by 500,000.

Cost of Living

A raft of extra support measures comes into effect next April – not soon enough for some critics.

  • £900 for those on means-tested benefits
  • £300 for pensioners
  • £150 for those on disability benefits
  • £200 for households using alternative fuels
  • Energy Price Guarantee set at £3,000 from April 2023

The Energy Price Guarantee means there will be an actual rise of 20 per cent in the amount energy suppliers are allowed to charge households. Bigger bills will result - possibly an extra 43 per cent, as the £400 payment all homes get this winter won't be extended.

Benefits

From April 2023, inflation-linked benefits and tax credits will increase by 10.1 per cent in line with inflation, an uplift campaigned for by BASW and others.

This means an extra £33.83 a month for a single person on Universal Credit, and for those on tax credits, £214.65 a year.

The benefits cap will also rise with inflation, and social rent rises have been capped at seven per cent.

  • Benefits and the state pension will increase by 10.1 per cent in line with inflation
  • Rents will be capped at seven per cent 
  • The National Living Wage will rise to £10.42

More than 600,000 people on Universal Credit will have to meet with a work coach to get support to ‘increase their hours or earnings’.

An extra £280 million will be invested to tackle benefit fraud, and the review of the state pension age will be announced in 2023.

Health and Social Care

  • £2.8bn in 2023-4 and £4.7bn in 2024-5 for adult social care
  • £3.3bn a year until 2025 for the NHS
  • 200,000 more care packages to ease bed blocking
  • An ‘independently verified plan’ to improve recruitment

Education

  • The schools budget will increase by £2.3bn a year

Levelling up

The Chancellor committed to not cutting capital budgets for two years – or the next election – saying investment will continue.

  • There will be £600bn of investment over the next five years
  • Northern ‘powerhouse’ and HS2 rail projects stay in place
  • New hospitals promised

Other announcements in the autumn statement

Below, we include the rest of the main points from today's budget, which also included major tax changes for businesses, a renewed commitment to energy efficiency across the UK, and detail on defence spending, innovation, foreign aid and climate change.

Businesses

  • There will be a £14bn tax cut on business rates, helping 700,000 businesses
  • Windfall taxes on energy companies will raise £14bn
  • Businesses face an increase in National Insurance Contributions (NICS)
  • The employer threshold has been frozen until 2028
  • Company car tax rates will be lower for electric vehicles

Energy

  • A target of 15 per cent reduction in UK energy consumption by 2030 will receive £6bn funding
  • The creation of an Energy Efficiency Taskforce

Innovation

  • Research and development funding will increase to £20bn by 2025
  • Investment zones will centre on ‘left-behind’ areas
  • Tariffs will be cut

Defence, Foreign Aid and Climate

  • Foreign aid spending will stay at 0.5 per cent until economic conditions improve
  • The defence budget will be at least 2 per cent of GDP in line with NATO commitment
  • The government remains ‘fully committed to a 68 per cent reduction in UK emissions by 2030