The Autumn Statement of 17 November 2022 was, by design, the opposite of the Mini-Budget that preceded it. Where Kwasi Kwarteng had delivered an expansionary package of unfunded cuts, Jeremy Hunt delivered a fiscal consolidation built almost entirely on threshold freezes, allowance reductions, and the lowering of one specific threshold — the entry point to the 45% additional rate of income tax.
Three and a half years later, the threshold freezes Hunt announced are still in force and are the single biggest reason most UK taxpayers have seen their effective tax rate creep upward without a single headline rate changing.
The headline freezes
The personal allowance was frozen at £12,570 until April 2028, two years beyond the previous freeze end-date. The higher rate threshold was frozen at £50,270 until April 2028 on the same basis. The inheritance tax nil-rate band was frozen at £325,000 and the residence nil-rate band at £175,000 until April 2028. The National Insurance secondary threshold for employers was frozen. The capital gains tax annual exempt amount was cut to £6,000 from April 2023 and £3,000 from April 2024, down from £12,300. The dividend allowance was cut to £1,000 from April 2023 and £500 from April 2024, down from £2,000.
The additional rate threshold was lowered from £150,000 to £125,140 from 6 April 2023 — bringing tens of thousands of additional earners into the 45% band for the first time. The £125,140 figure was deliberate: it is the point at which the personal allowance fully tapers to zero under the existing £100,000 abatement rule, creating a clean junction between two pre-existing thresholds.
Why this approach raises so much revenue
A frozen threshold raises revenue every year that wages and prices rise — a phenomenon known as fiscal drag. With inflation running at double digits through 2022 and 2023 and wage settlements averaging 5% to 7% across the period, a six-year freeze on the personal allowance and higher rate threshold drags millions of taxpayers into higher tax bands and pushes basic-rate taxpayers into the higher-rate band. The OBR estimated at the time that the freezes would raise approximately £25 billion per year by the end of the freeze period, although the actual figure depends heavily on wage growth.
For owner-managed businesses, the most punishing element was the combined effect of the additional rate threshold reduction and the dividend allowance cut. A director-shareholder drawing £160,000 in dividends in 2022-23 paid the 39.35% upper rate on amounts above £150,000. From 2023-24, that 39.35% rate now applies from £125,140, taking roughly £25,000 of dividend income from the 33.75% band to the 39.35% band — an additional charge of around £1,400 per year, every year, with no further policy change required.
Energy reliefs and the Energy Profits Levy
Alongside the personal tax measures, Hunt extended the Energy Price Guarantee at £3,000 for the average household from April 2023 and increased the Energy Profits Levy on North Sea oil and gas producers to 35% with a sunset clause extended to 2028. A new Electricity Generator Levy of 45% on extraordinary profits was also introduced. None of these measures was particularly relevant to SME tax planning but they framed the political backdrop for the personal threshold freezes — the message was that the burden was being shared.
R&D reform begins
The Autumn Statement also contained the first reduction in the SME R&D additional deduction from 130% to 86%, and a cut to the payable credit rate from 14.5% to 10% for non-intensive loss-making SMEs, both effective April 2023. The Research and Development Expenditure Credit (RDEC) was simultaneously increased from 13% to 20%. This was the beginning of the long R&D reform journey that culminated in the merged scheme from April 2024.
Our corporate tax team flagged the R&D changes immediately to clients with active claims — for genuine SMEs with substantial qualifying spend, the reduction in the additional deduction was material, and the timing of claim periods became more important than ever.
The verdict, three years on
The Autumn Statement of 2022 was a quiet tax rise dressed as fiscal restraint. It contained almost no rate changes, but the threshold freezes it extended and the additional rate threshold it lowered have produced — and continue to produce — billions of pounds of additional revenue every year. For most UK taxpayers, the cumulative impact of these freezes by April 2026 is far larger than any single Budget measure announced in the intervening four years.
If your income has crossed any of the now-frozen thresholds in the past three years, the planning conversation has shifted. Book a personal tax review and we will model the cumulative effect on your position.