Autumn Statement 2022

“The beatings will continue until morale improves!”

In September, the Government headed by Liz Truss announced the biggest package of tax cuts in living memory. Conservative MPs loved it, but the markets did not agree. The Chancellor, Kwasi Kwarteng, was sacked and Liz Truss forced to resign. Jeremy Hunt, the new Chancellor, announced in October that most of the previous month’s announced measures would not take place and promised further, unspecified, tax changes and spending cuts. Today’s Autumn Statement saw the further revised version of the Government’s fiscal plan.

So where are we now? We have set out below a summary of the main changes which will take effect following this series of announcements.

Taxes for business

Corporation tax rate: this will go up on 1 April 2023 (as planned before this autumn’s series of announcements) to 25%, with phased rates between 19% and 25% for companies with profits below £250,000. The 25% rate is now likely to stay in place for some time, and as the phasing thresholds are unlikely to change, the principle of fiscal drag will gradually increase the numbers of companies paying tax at the full 25% rate. Companies would be well advised if possible to realise profits before 1 April and defer using losses until afterwards.
Annual investment allowance: the £1 million allowance per business was due to end in April 2023 but will now continue at that level “permanently”.
VAT registration threshold: this remains unchanged at £85,000; and will continue until April 2026. Inflation will bring increasing numbers of businesses above this level. Where relevant, consider splitting different business streams into separate legal ownership.
Employment taxes: these will rise gradually, along with the increased minimum wage. The NICs secondary threshold will increase to £9,100 but will then stay at that level until April 2028. The NICs employment allowance will stay at £5,000 per business.
R&D rates: for expenditure on or after 1 April 2023, the Research and Development Expenditure Credit 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 will decrease from 14.5% to 10%.
Windfall taxes: the Energy Profits Levy will increase by 10 percentage points to 35% from 1 January 2023 and will be extended to the end of March 2028. A new Electricity Generator Levy will be introduced – a temporary 45% tax that will be levied on extraordinary returns (arising from 1 January 2023) from low-carbon UK electricity generation.
Online sales tax: not happening! Following consultation, the Government has decided not to introduce one.

Personal taxes

Income tax: income tax rates are unchanged. But the personal allowance and rate thresholds for the basic and higher rates are frozen until 2028.
45% additional rate: far from being abolished, as was promised in September, the 45% additional rate threshold is reduced from £150,000 to £125,140 (the amount at which tapering of the personal allowance reduces it to nil).
Dividend tax: There is no change to the dividend tax rate but the £2,000 dividend allowance is reduced to £1,000 next year and £500 in 2024.
NICs rates and thresholds: these had been fixed until 2026, but are now fixed until 2028.
CGT: no increase in rate as had been feared, but the CGT annual exempt amount (currently £12,300) will reduce in 2023 to £6,000 and then to £3,000 in 2024. Use it or lose it!
IR35: the rules requiring large companies to determine if their contractors should be subject to employment taxes will remain in place.

Property taxes

Business rates: a package of measures to support smaller businesses including increased relief for retail hospitality and leisure businesses and a new Supporting Small Business scheme.
Stamp duty land tax: the removal of the 2% rate applicable to purchase price between £125,000 and £250,000 for residential property will remain for now, as will the extension to first-time buyer’s relief. But they will both be cancelled on 31 March 2025. Expect a rush to complete residential property deals in the weeks leading up to that date. This is a deliberate policy!

And finally …

Electric cars: these will lose their tax benefits from 2025; a nasty shock for those who have bought their e-vehicles already in reliance on low tax rates.

“I understand the motivation of my predecessor’s mini-budget and he was right to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending”
Chancellor’s Speech

“my decisions today do lead to a substantial tax increase”
Chancellor’s Speech

“Those earning £150,000 or more will pay just over £1200 more in tax every year.”
Chancellor’s Speech

" I will sunset the [SDLT reductions], creating an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it.”
Chancellor’s speech