Autumn Statement – “Difficult Decisions”

Last week’s Autumn Statement brought little cheer but there are things we can do to lessen the pain.

In their commentary of November's Autumn Statement (“Difficult Decisions”), Castlefield's David Gorman and Hugh Austin summarise the key points and consider what the Thoughtful Investor makes of the measures announced.

These are tough times and, with few expecting good news in last week’s Autumn Statement, we weren’t disappointed. One straw we can clutch at is that, only a couple of months after the damage wrought by the “fiscal event” under the previous PM and Chancellor, the new incumbents have restored some stability. Nevertheless, last week’s Statement made grim reading for many.

The broader context is of course the Covid-19 pandemic, during which the government spent an additional £350 billion pounds of taxpayers’ money above its original Budget. All public spending must eventually be paid for by tax and other government income and, unfortunately, the amounts raised from these sources fell significantly as a result of lockdowns.

To make ends meet, the Government greatly increased public borrowing (to £323 billion in 2020/21). When the cost of borrowing was very low, this did not really matter but, as much higher inflation has taken hold, the Bank of England has tried to combat rising prices by increasing interest rates and so the cost of Government borrowing has gone up just at the wrong time in the economic cycle.

The new incumbents have restored some stability. Nevertheless, last week’s Statement made grim reading for many.

We summarise below the main measures announced in Mr. Hunt’s statement in which he set out three priorities – stability, growth and public services – and detailed the “difficult decisions” he has taken on our behalf. The upshot of these measures it that we are likely to end up with the highest UK personal tax burden for 70 years.

Nevertheless, in the midst of all this bad news, companies are still making money, hence the reason we invest and just this week we have seen some great news from a couple of companies in which we invest on your behalf. Yorkshire-based Harmony Energy has fired up – ahead of schedule - Europe’s largest battery energy storage system[1] while technology hardware company Calnex Solutions has just reported some excellent interim results and a confident outlook for the full year.

Returning to the Autumn Statement, what is the Thoughtful Investor to make of the measures announced?

It was disappointing to hear the Chancellor describe dividends and capital gains as “unearned income.” Dividends are not “unearned income” but are a payment a shareholder receives for committing his or her cash to investing in a business. Nevertheless, the Chancellor decided to reduce the annual dividend allowance from £2,000 this year to a mere £500 in 2024/25. For individual investors, this highlights the importance of maximizing your ISA Allowance each year as dividends received on investments held in an ISA are tax-free.

The upshot of these measures it that we are likely to end up with the highest UK personal tax burden for 70 years.

Capital Gains Tax exemption thresholds were also drastically reduced. Again, to help mitigate CGT, it is definitely worth maximizing investments in ISAs, taking advantage of the CGT exemption each tax year and making use of tax losses to help offset gains. Freezing tax thresholds will undoubtedly drag more of us into paying more income tax and more inheritance tax. If you need any help, we recommend speaking to your Castlefield adviser.

Companies themselves are likely to find life even tougher over the next few years. They have already seen the damaging effects inflation in their supply chain but they will now have to deal with higher corporation tax and, if they are consumer-facing, belt-tightening among hard-pressed end customers. We try to invest in sustainable companies which operate in growth markets where profit margins can be defended; nevertheless, we still expect corporate earnings to come under pressure in many cases.

It was frustrating to hear that, although the Chancellor trumpeted Britain as a global leader in renewable energy, he will increase the energy profits levy from 0.25% to 0.35% from January next year. The government is introducing an Electricity Generator Levy, a temporary 45% that will be levied on extraordinary returns from low-carbon electricity generation arising, also from January 2023. That said, the levy does not apply to all energy production contracts. 

Mr. Hunt introduced numerous other measures and drove home the message of a gloomy outlook for the British economy. Increase taxation and reduced government expenditure should bring inflation under control next year but probably at the expense of economic growth, which is already sluggish. It is hard to offer clients much comfort at the moment except to say that wealth management is a long-term game and we will come out of the other side – eventually. In the meantime, we will continue working hard to find compelling investment ideas and offer clients the best possible service.


Autumn Statement – The Chancellor’s measures in detail

The Office for Budget Responsibility’s (OBR’s) economic and fiscal outlook set a gloomy backdrop to the budget with the following standout figures:

  • Inflation is set to peak at a 40-year high of 11% this quarter.
  • The next two years will see living standards reduce year-on-year by the largest amounts since records began, wiping out the previous eight years of growth.
  • Borrowing relative to March forecast to increase by over £100 billion by the end of 23/24 tax year. Underlying debts are set to push up close to 100% of GDP leaving the public finances more exposed than they have been for decades.


With that said, the following changes to personal taxation were announced, with the chancellor keen to stress that those with the broadest shoulders will bear the greatest burden:

  • Basic rate of tax to remain at 20p and additional rate tax will remain. The additional rate tax threshold will decrease from £150,000 to £125,140.
  • Personal tax thresholds within income tax, NICs and inheritance tax to be fixed for a further two years until April 2028.
  • The Capital Gains exemption amount will decrease to £6,000 from April 23 and decrease further to £3,000 in April 24.
  • Likewise the dividend allowance will be decreased to £1,000 from April 23 and to £500 from April 24.
  • The stamp duty threshold increase announced in September will be maintained until April 2025.
  • Married Couple’s Allowance and Blind Person’s allowance will be uprated by the September CPI figure of 10.1% for the 2023-24 tax year.
  • The state pension “triple lock” will be upheld.


Amongst the changes affecting corporations, the following are notable:

  • Corporate tax increase to 25% for companies with profits over £250,000. The planned Bank Corporate Tax Surcharge will go ahead, meaning banks will be charged an additional 3% on their profits above £100m.
  • NICs Secondary threshold and VAT reg. threshold will be maintained a current levels until April 2028 and April 2024 respectively.
  • The energy profits levy will increase from 0.25% to 0.35% from 1 Jan 23. The government is introducing an Electricity Generator Levy, a temporary 45% that will be levied on extraordinary returns from low-carbon electricity generation arising from 1 Jan 23.


Additional things to note from the Statement are:

  • Vehicle Excise Duty on electric vehicles will be introduced from April 2025.
  • The energy price guarantee will be adjusted so that a typical household will pay £3,000 per year from April 2023 to March 2024.


There will be additional cost of living payments of:

  • £900 for those on means tested benefits
  • £600 for pension households
  • £150 for individuals on disability benefits
  • Benefits and the benefit cap will increase in line with inflation in April 2023.


Written by Hugh Austin (Castlefield Advisory Partners) and David Gorman (Castlefield Investment Partners)



[1] Europe’s largest battery storage system by energy capacity or MWh


Information is accurate as at 22.11.2022. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.