The budget announcement comes at a time when inflation in the UK reached 11.1% (November 2022) its highest point for 41 years.
Hunt's changes mean the threshold at which people pay the maximum 45p income tax rate has been lowered from £150,000 to £125,124.
Allowances and thresholds for income tax, national insurance and inheritance tax are set to be frozen for an extra two years, going up to April 2028.
Dividend allowance will also be reduced, dropping from £2,000 to £1,000 in 2023, and then to £500 in April 2024.
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Windfall taxes for oil and gas companies have been increased to 35%, while the government has introduced a 45% levy on electric generators.
Hunt estimated these measures will raise an extra £14 billion for the economy.
The chancellor announced the Department for Work and Pensions (DWP) will conduct a review into issues holding back workforce participation.
Government also pledged to invest £280 million into the DWP to help crack down on benefit fraud and a further £11 billion has been invested in benefits, raising them 10.1% to keep in line with inflation.
People receiving universal credit will also be urged to regularly meet with work coaches to help increase their chances of finding employment.
Seb Maley, CEO of tax consultancy Qdos, said self-employed workers were forgotten about during the budget announcement.
He said: “The self-employed have been buried in bad news recently and this budget doesn’t help matters. The chancellor speaks about stability and growth, but has abandoned the self-employed, who are critical to ensuring both. Slashing the dividend tax threshold adds insult to injury.
“The government works on the basis that small businesses have pockets as deep as big businesses, and can absorb these freezes and tax hikes. The reality is, many can’t. The past few months have been a rollercoaster for contractors, in particular, who were led to believe that IR35 reform was to be repealed – only for the government to cruelly break this promise weeks later.
“At the very least, the government must address the fundamental flaws which continue to plague the IR35 rules and see thousands of contractors forced into zero rights employment. If the chancellor thinks he’s put the issue of IR35 to bed, he’s mistaken. After backtracking on the IR35 reform repeal, calls for a review are likely to grow louder.”
The budget accounted for increases to wages in the UK.
From April 2023 the national living wage will increase by 9.7% to £10.42 per hour in what Hunt described as the largest ever increase in the UK's national living wage.
Alexandra Farmer, head of team and solicitor at WorkNest, said the changes will force companies to take stock of their workforce.
She said: “With the rise in the national living wage mentioned in the budget, I expect a number of businesses will assess their workforce. Do they need all the employees they have? Can they make efficiencies to allow them to reduce the overall headcount? If so, we could be looking at an increase in redundancies over the next few months.
"It’s likely businesses will want these completed ahead of the rise in April to limit costs (i.e. redundancy payments and notice payments would otherwise be calculated using the higher rate of pay once it comes into effect)."
“Unfortunately, it’s not an option to not pay the living wage for employees over 23. Furthermore, I expect all other rates to rise in similar fashion, albeit those rates don’t appear to have been announced yet.
“If an employee doesn’t believe they’re being paid correctly, they would normally raise a grievance with their employer in the first instance. Then, if they’re still unhappy, they can make a complaint to HMRC and/or make a claim to an employment tribunal.”
Hunt announced an increase to pension credit of 10.1%, protecting the pensions triple lock and raising the state pension to £871 to match inflation.
Chris Eastwood, co-Founder of pensions provider Penfold, said the pension investment will be welcomed, even if there's still room for improvement.
He said: “Pensioners across the country will be welcoming today’s commitment to triple lock. Hopefully, today’s decision brings an end to the uncertainty and turbulence that has characterised the pensions industry for some months now. The removal of the triple lock would have only added to the worrying levels of pensioner poverty we are already seeing.
"However, at only £200 per week, the state pension is still not enough to afford a moderate lifestyle when you retire so we are encouraging savers to consider alternative means of getting ready for life after work such as saving into a SIPP alongside your workplace pension and combining old workplace pensions throughout your career so you’re able to keep track of how much you have saved and where you need to get to.”
