With the cost of living rising and the Office for Budget Responsibility (OBR) confirming that the UK has now entered a recession, the new Chancellor of the Exchequer, Jeremy Hunt, gave his Autumn Statement to the House of Commons on 17th November 2022. Here is a summary of the main measures affecting businesses.
What are the changes to taxation?
Income tax - The income tax additional rate threshold will drop from £150,000 to £125,140 as of 6th April 2023, according to the Chancellor's announcement. According to estimates, this change will result in an additional 250,000 individuals paying the additional 45% Income Tax rate starting next April.
Personal allowance thresholds and the basic rate limit (which were announced in March 2021 to remain unchanged until April 5th 2026) will be maintained at their current levels for a further two years until April 2028 i.e. the basic rate limit will remain frozen at £37,700 and the personal tax allowance will remain at £12,570 through to April 2028. Regional variations to Income Tax rates may apply in Wales and Scotland.
Tax on dividend income - The current £2,000 dividend tax-free allowance is to be reduced to £1,000 from April 2023 and to £500 from April 2024.
Inheritance Tax - No changes to present rates and allowances were announced. These rates and allowances will remain frozen at current levels until April 2028.
Stamp Duty Land Tax - These changes were one of the only surviving measures from the mini-Budget. It was announced as part of the Autumn Statement that these measures will remain but as a temporary SDLT reduction until 31st March 2025 and not as a permanent change as originally announced.
National Insurance - The Chancellor also confirmed that the National Insurance contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) that were already fixed at their current levels until April 2026 will now be maintained for a further two years until April 2028.
Capital Gains Tax - The Chancellor announced a significant reduction in the annual exempt amount applicable to Capital Gains Tax (CGT). The exempt amount will now be reduced to £6,000 from April 2023 before being further reduced to £3,000 from April 2024.
Corporation Tax – There is no change to the planned increases in Corporation Tax effective April 2023 previously announced.
Diverted Profits Tax - The rate of Diverted Profits Tax will increase from 25% to 31% from 1 April 2023.
Corporation Tax – R&D Relief - The Research and Development Expenditure Credit (RDEC) rate will increase to 20% (from 13%) with effect from 1st April 2023. From the same date, the small and medium-sized enterprises (SME) enhanced deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.
Windfall Taxes - The Energy Profits Levy (EPL) will increase to 35% (from 25%), effective 1st January 2023. The investment allowance will be reduced from 80% to 29% for qualifying investment expenditure, thereby maintaining its existing cash value. The Levy is scheduled to end on 31 March 2028, raising £40 billion over the next 6 years.
Vehicle Excise Duty (VED) - VED will become applicable on electric cars, vans and motorcycles from April 2025.
Company Car Tax - The rates of company car tax that apply until April 2028 have been announced in order to provide long-term certainty for taxpayers and industry. The rates will continue to incentivise the takeup of electric vehicles.
VAT - There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will now remain at these levels until 31st March 2026.
What other significant measures were announced?
National Living Wage increases - The NLW will increase to £10.42 per hour (previously £9.50) from 1st April 2023.
Council Tax flexibility - Starting in April 2023, the government will increase the amount by which each council can raise the Council Tax without a referendum from 2% to 3% per year, which is expected to raise the limit on Council Tax increases.
Business rates - Business rate bills in England will be updated from 1 April 2023 to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion has been announced to help support businesses with this change as well as increased costs.
Energy price guarantee scheme - The Chancellor announced that the energy price guarantee scheme which will see the average household have their energy bills capped at £2,500 a year will remain in place until 31st March 2023. From 1st April 2023, the cap will rise to £3,000.
Cost of Living Payments - The Cost of Living support package to help over 8 million households in receipt of means-tested benefits is to be extended. This will see an additional Cost of Living Payment of £900 in 2023-24. There will also be a new Cost of Living payment for pensioners who will receive an additional £300 and an additional £150 payment for those on non-means-tested disability benefits in 2023-24.
Benefits Uprating - The government will also raise benefits, including working-age benefits and the State Pension, in line with inflation from April 2023. These payments will rise by the September Consumer Price Index (CPI) inflation rate of 10.1%. As a result of uprating these working-age and pension benefits, around 19 million families will see their benefit payments increase from April 2023.
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