The Autumn Statement comes less than two months after September’s “mini budget” the majority of which was reversed by Jeremy Hunt when he was first installed as The Chancellor. As such, the Autumn Statement should be read with these in mind, and we thought a summary as set out below of the main changes (and reversals!) over the recent period would help.
Final Position of Mini Budget
Consumer Households Energy Price Guarantee (“EPG”)
The cap on the unit price of energy for households, to bring the average household bill to £2,500 per year, which will run until the end of March 2023. (the Autumn Statement announced an extension from next April, but not so generous).
Energy Bill Relief Scheme (“EBRS”) for non-domestic users
A similar relief scheme to the EPG, for non-domestic users, which is still in place as originally planned, until March 2023.
The Tax Burden
- Corporation Tax rates will be increasing from 1 April 2023, from 19% to 25%.
- The cancellation of the Health and Social Care Levy (the 1.25% increase) from November 2022 remains in place for earned income.
- The basic rate of income tax will remain at 20% for the foreseeable future.
- There will be no abolition of the 45% additional rate income tax band (see change to the threshold announced in Autumn Statement, at which 45% will be paid from next April).
- There will be no abolition of the equivalent dividend additional rate income tax band, and the 1.25% increase in income tax on dividends will apply from April 2023.
- The Stamp Duty reforms on residential property (changing the level at which stamp duty is payable from £125,000 to £250,000) is still in place, but announced in Autumn Statement until 31 March 2025.
- The first-time buyers SDLT rate threshold increase from £300,000 to £425,000 will remain in place, subject to a maximum price of £625,000.
- Capital Allowances Annual Investment Allowance threshold still to be permanently set at £1million from April 2023.
- Seed Enterprise Investment Scheme (“SEIS”) maximum investment raise from £100,000 to £250,000, increasing the gross asset limit to £350,000 and the age limit from 2 to 3 years still in place from April 2023.
- The 2017 and 2021 reforms to off-payroll working rules will no longer be repealed in April 2023. These will continue to apply as they have done since 2021.
Autumn Statement 2022 – Tax changes
Income tax & National Insurance
The income tax additional rate threshold has been reduced from £150,000 to £125,140 from 6 April 2023, meaning that for income between these bands, income tax will be payable at 45% rather than at 40%. For dividend income, income tax will be payable at 39.35% rather than 33.75%.
The current Income Tax and National Insurance thresholds will be maintained at their current levels for two years further than originally planned. These will now all be frozen until April 2028.
The Employers National Insurance threshold (the Secondary Threshold) will be frozen at £9,100 until April 2028.
Class 2 and Class 3 National Insurance rates will rise from April 2023, in line with inflation. Class 2 will be £3.45 per week, and Class 3 will be £17.45 per week.
The Dividend Allowance (the amount of dividend you can receive tax free) will be reduced from £2,000 to £1,000, from April 2023, and to £500 from April 2024.
Company Car Tax Benefit in Kind rates on fully electric cars (currently 2%) will increase by 1% each year from 2025/26, to a maximum of 5% in 2027/28.
The Capital Gains Tax Annual Exempt Amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. For husband and wife disposing of assets with a chargeable gain, currently £24,600 tax free, from April 2024, only £6,000.
To address tax avoidance, legislation will be brought in (effective immediately) that non-UK company shares/securities acquired in exchange for UK company shares/securities will be deemed to be located in the UK for Capital Gains Tax and Income Tax purposes.
The inheritance tax threshold (known as the nil rate band) of £325,000 is frozen until April 2028. This threshold has not been changed since 2010!
The Stamp Duty Land Tax (“SDLT”) threshold increase included in the “Mini-budget” will now only be temporary, remaining in place until 31 March 2025.
Cost of living support/other taxes
In 2023/24 an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits, of £300 to pensioner households, and of £150 to individuals of disability benefits.
Working age benefits and the State Pension will rise in line with inflation, from April 2023, being a 10.1% rise.
The National Living Wage (“NLW”) will rise by 9.7% to £10.42 per hour for those aged 23 and over, from 1 April 2023. Similar rises will be made to the other minimum wage rates (the age-related thresholds and apprenticeship threshold).
The Energy Price Guarantee (“EPG”) will be extended from April 2023 until March 2024, however at a higher average household threshold of £3,000 per year, rather than the current £2,500 per year rate that applies until March 2023.
Council Tax flexibility has been increased, allowing local authorities to increase council tax by up to 3% without a referendum. In addition, for those with social care responsibilities, an increase to the adult social care precept of up to 2% per year can also be applied.
From April 2025, electric cars, vans and motorcycles will start to pay Vehicle Excise Duty, in the same way as petrol and diesel vehicles already do.
The Capital Allowances 100% First Year Allowance for Electric Vehicle Chargepoints will be extended to March 2025.
The energy profits levy (the energy ‘windfall tax’) will be increased by 10% (to 35%) and extended until the end of March 2028.
A new 45% temporary Energy Generator Levy will be applied on electricity generators making extraordinary returns.
The VAT registration threshold will be frozen at £85,000 for two more years, from April 2024.
For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate (amount can be repaid) will decrease from 14.5% to 10%. The reduction in the SME relief has come of the back of HMRC’s recent fraud concerns relating to R&D claims.
There are no changes to the Energy Bill Relief Scheme (“EBRS”) – the support for non-domestic energy consumers – however there will be a review to determine what additional support to provide beyond March 2023.
From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion over the next 5 years will aim to support businesses as they transition to their new bills, protect businesses from the full impact of inflation, and support high streets.
The business rates multipliers will be frozen in 2023-24 at 49.9 pence and 51.2 pence, preventing them from increasing to 52.9 pence and 54.2 pence.
Support 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.
Bill increases for the smallest businesses losing eligibility or seeing reductions in SBRR or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023.
Should you wish to speak to us or need assistance on tax and accounting matters, please get in contact with us.