Autumn statement 2022: Key announcements and analysis

The new Chancellor Jeremy Hunt has announced the Autumn Statement today, on the 17 November 2022, at the House of Commons. The government accepts that the UK is now in recession.

Their 3 major priorities are stability, growth, and public services. In the main, his plan outlined £24 billion in tax rises and £30 billion in spending cuts. The following top line announcements that could affect your businesses are as follows:

Major Taxes

Income Tax:

The threshold for the 45% additional tax rate is reduced from £150,000 to £125,140, increasing taxes for those on higher incomes from 6 April 2023. Those with higher income of £150,000 or more will pay £1,243 more in tax from next year. The income tax personal allowance threshold of £12,570 has been frozen for a further two years from April 2026 to April 2028.

Dividend Tax:

The tax-free dividend allowance of £2,000 will reduce to £1,000 from April 2023 and to £500 from April 2024. Individuals who are within the basic rate band will pay £87 more in tax from April 2023 and £131 from April 2024. With the rise in corporation tax and the changes in dividend allowances and tax rates, contractors and other businesses operating through a limited company, solely for tax reasons, should review if it is still beneficial for them to operate in the current manner.

National Insurance:

The threshold at which individuals start paying national insurance was already increased from £9,880 to £12,570. This threshold will be fixed until April 2028. The social care levy of 1.25% that was supposed to be introduced in April 2023 was also abolished in the mini-budget 2022 and no further changes have been announced in today’s statement. Similarly, the Employers National Insurance Contributions threshold will be fixed at £9,100 till April 2028. No changes have been made to the employment allowance of £5,000 available to businesses and it will continue to remain at the same level.

Capital gains tax:

The capital gains tax annual exempt amount will reduce from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. This doesn’t come as a surprise because every budget announcement in the last few years has been anticipating changes to the Capital Gains Tax regime. Landlords and other owners who are planning to dispose of their assets could expedite the date of disposal by entering into an unconditional contract with the buyer. The date of disposal is usually the date when an unconditional contract is made or if the contract is conditional, the date when all conditions are satisfied.

Stamp Duty Land Tax:

The SDLT cuts announced in the mini-budget of 22 September 2022 will become a temporary measure and continue to remain so until 31 March 2025. After 31st March 2025, the previous thresholds that applied to the purchase of residential properties in England and Ireland and stamp duty land tax, paid by first-time buyers, will be reinstated.

Inheritance Tax (IHT):

The nil-rate band of £325,000 and the residence nil-rate band of £175,000 will stay fixed till April 2028.

VAT:

The VAT-registration threshold of £85,000 and the deregistration threshold will remain at the current level till April 2024.

Corporation tax:

The increase in corporation tax rate from 19% to 25% for businesses with profits exceeding £250,000 will apply from April 2023. The current rate of 19% will apply to companies with profits of up to £50,000, so almost 70% of the companies will be unaffected by the increase.

Other measures

R&D Tax relief:

As a measure to tackle abuse and fraud in the small and medium sized enterprises (SME) R&D scheme, the enhancement of expenditure rate will reduce from 130% to 86% and the credit rate for loss-making companies will reduce from 14.5% to 10% from April 2023. Additionally, the rate for Research and Development Expenditure Credit (RDEC), that mainly applies to larger companies, will increase from 13% to 20%. The other R&D reforms that were announced in previous budget including the inclusion of data and cloud costs as part of R&D qualifying expenditure will remain.

Business rates:

The business rates multiplier will be frozen at 49.9 pence and 51.2 pence in 2023-24. The support announced for eligible retail, hospitality and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24. The business rates relief will help somewhat to release the pressure on the retail sector where insolvencies have increased in the recent years.

Company Car Tax rates:

The benefit in kind rate for electric cars and ultra-low emission cars provided by companies will remain frozen until April 2025. After that it will increase by 1% in 2025/26, 1% in 2026-27 and another 1% in 2027-28. The maximum BIK rate after the increases will be fixed at 5% for electric cars and 21% for ultra-low emission cars.

Fuel Benefit Charge:

The Van Benefit Charge and Car & Van Fuel Benefit Charges will increase in line with inflation from 6 April 2023.

First-year allowance for electric charging points:

The 100% FYA for electric vehicle charging points will be extended to 5 April 2025 for income tax and 31 March 2025 for corporation tax.

Annual Investment Allowance (AIA):

As announced in the mini budget, the AIA will remain permanently at £1m from April 2023. The proposed super-deduction technical changes will not be required.

Annual tax on enveloped dwellings:

The annual chargeable amounts for the ATED will be uplifted by 10.1% for the 2023-24 ATED charging period.

Summary:

The autumn statement consists of lot of tax rises and spending cuts, which is in total contrast to what we were told just over 8 weeks ago when we were promised the biggest tax cuts in 50 years.

Chancellor has left no stone unturned to squeeze taxpayers all the allowances and reliefs are being taken away to pay for the budget deficit. At least Markets will be satisfied and hopefully if this can calm the market interest rates will not shoot up as high as Bank of England forecasted.

Although this may result in less borrowing for the government, it will most certainly affect the households who are already hit by inflation, high energy prices and increased mortgage costs.

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