18 Nov Autumn Statement
On 17 November 2022, the Chancellor, Jeremy Hunt set out his much-anticipated Autumn Statement which was aimed at providing more stability to the economy in the current challenging times. There were some important changes that will impact on businesses and individuals. The Office for Budget Responsibility has estimated that living standards will fall by 7% over the next two years.
Our Autumn Statement Update is intended to give you some of the detail behind the measures announced by the Chancellor but if you would like to know how the measures affect your business specifically or would like to discuss potential tax planning situations, please contact us and we will help guide you through.
Income Tax
Following the recent scrapping and then reinstatement of the 45% tax rate, the Government have targeted this area again, announcing that the additional rate threshold will fall from £150,000 to £125,140 from 6 April 2023. Earnings over £125,410 will then be taxed at 45%.
In addition, the dividend allowance will be cut from £2,000 to £1,000 from 6 April 2023 and then further from 6 April 2024 to £500. This measure will impact on many small business owners. Is this the beginning of the end for the dividend allowance?
What hasn’t changed?
The Personal Allowance will remain at £12,570 and the higher rate (40%) threshold will remain at £50,270 until April 2028, two years longer than previously announced. This will mean that over time more people are paying tax, and are paying tax at a higher rate, than previously as wages increase with high levels of inflation.
Capital Gains Tax
Many will be relieved that there weren’t any changes to Business Asset Disposal Relief in the Autumn Statement. However, the Capital Gains tax Annual Exempt Amount will be cut from £12,300 to £6,000 in April 2023 and then cut further from April 2024 to £3,000. If any disposals are planned, consideration should be given to ensuring it occurs in the 2022/23 tax year to take advantage of the higher level of exemption.
VAT
The VAT registration threshold will remain at £85,000 until March 2026. With current rates of inflation this will mean that more businesses are required to register for VAT.
Employers National Insurance
The Employment Allowance of £5,000 will remain which means that 40% of employers will not pay Employer’s NIC.
The threshold for paying Employer’s NIC has been frozen at £9,100 for a further two years to April 2028 which will result in an additional tax burden for employers as wages increase.
National Minimum Wage and National Living Wage
The Chancellor announced that the National Living Wage, payable to workers aged 23 and over, will increase by 9.7% from £9.50 per hour to £10.42 from 1 April 2023. This will be welcome news for those on low incomes, but it will be a significant additional cost for businesses that are already feeling the pinch. A summary of the rate changes for all ages is shown below.
| 23 and over | 21 to 22 | 21 to 22 | 21 to 22 | Apprentice | |
| April 2022 (current rate) | £9.50 | £9.18 | £6.83 | £4.81 | £4.81 |
| April 2023 | £10.42 | £10.18 | £7.49 | £5.28 | £5.28 |
Corporation Tax
The already planned increase of the Corporation Tax rate to 25% with profits over £250,000 will go ahead from April 2023. Companies with profits of £50,000 or less will continue to pay tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate of 25% which will be reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
Research & Development
The additional deduction from small and medium-sized enterprises (SMEs) has been cut from 130% to 86% and the SME credit rate (for loss making businesses) will decrease from 14.5% to 10% which will be a blow for start-up businesses relying on the cash injection.
Business Rates
Business rates revaluations will still take place as planned every three years from 2023 but the business rates multipliers will be frozen in 2023-24 and there will be transitional relief caps for those affected by increases in valuations.
Retail, hospitality and leisure businesses will continue to benefit from reliefs which will be extended and increased to 75% from 50%.
Annual Investment Allowance
The Annual Investment Allowance, which provides businesses with 100% capital allowances relief on their qualifying capital expenditure of up to £1m, had previously been extended to April 2023 to encourage businesses to continue to invest in capital equipment. This will become a permanent level of relief from 1 April 2023.
Stamp Duty Land Tax
The previously announced SDLT cuts will remain in place until 31 March 2025. The nil rate threshold for all purchasers of residential property is £250,000 and for first-time buyers this is £425,000 with the maximum purchase price for which First-Time Buyers’ Relief can be claimed being £625,000.
Electric Vehicles
From April 2025 electric vehicles will no longer be exempt from paying vehicle excise duty. In addition, the company car tax rates for electric vehicles will increase by 1% in 2025/26, a further 1% in 2026/27 and a further 1% in 2027/28 up to a maximum of 5%.
The 100% First Year Allowance for electric vehicle charging points has been extended to 31 March 2025 to continue to encourage businesses to invest in this infrastructure.
Additional announcements that may be of interest to you include:
- Inheritance tax and residence nil rate bands will remain at current levels until April 2028.
- The Energy Price Guarantee will be maintained at £2,500 until April 2023 when it will rise to £3,000.
- The State Pension and working age benefits will rise in line with inflation from April 2023.
The information included in this report is intended for guidance only. It is based upon our understanding of current legislation and announcements and is correct at the time of publication. No liability is accepted by R J Francis & Co for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken specific to your circumstances.
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