Tax insight: UK Autumn statement 2022
The UK Chancellor today – 17 November 2022 – delivered his Autumn Statement, in effect a Budget aimed at repairing the damage done to the economy by the Growth Plan that his predecessor announced in September 2022. Tax partner Craig Coyle examines the highlights of today’s announcement and the potential impact on taxpayers and businesses.
This was widely trailed as being a package of measures that would increase taxes. Whilst not all of the rumoured increases came to pass, there were still some important measures to be aware of. Consilium Chartered Accountants will provide more detailed thoughts early next week, but here is a summary of the key measures impacting our clients.
Income Tax
Thresholds will remain frozen until April 2028 (unless of course a decision is subsequently taken to change them) – this is a significant “stealth” tax increase, particularly at a time of high inflation.
The additional rate of tax will be payable from £125,140 rather than £150,000 from April 2023. This currently only applies to investment income in Scotland until the Scottish Budget on 15 December. However, it would seem likely that the Scottish Government will apply the 46% rate of tax to earned income from the new £125,000 threshold. The increase in tax paid by someone earning £150,000 or more will be £1,243 per annum.
The dividend allowance of £2,000 will reduce to £1,000 from April 2023 and to £500 from April 2024 – one can debate the merits of continuing to have an allowance at this reduced level.
Capital Gains Tax
Changes in this area were much more limited than were rumoured. With no change in the headline rate and no changes to the main reliefs, particularly BADR (previously Entrepreneurs’ Relief), this is good news for those looking to sell their businesses.
However, the annual capital gains tax exemption will reduce to £6,000 in April 2023 and further to £3,000 from April 2024, requiring more individuals to pay capital gains tax and complete tax returns.
Inheritance Tax
The nil rate band will be frozen until April 2028 as with income tax, but this has been the threshold level since 2009 and will therefore not have been increased in almost 20 years.
Corporation Tax
The previously announced then unannounced then announced again increase in the rate to 25% will take place in April 2023, and the Annual Investment Allowance will be fixed at £1,000,000.
Changes are being made to the R&D tax credit regime, with some changes (both positive and negative) to the categories of expenditure which qualify for the relief, but more significantly a reduction in the rate of the relief. An SME currently receives a deduction of 230% for any qualifying expenditure, and this will decrease to 186%. The repayable credit under the SME scheme will reduce to 10% from 14.5%. However, the rate paid to larger companies and those not eligible for the SME scheme under RDEC will increase from 13% to 20% (an effective increase of 4.5% given the upcoming change in CT rates).
An SME company which had £100,000 of qualifying expenditure would previously have received an additional deduction of £130,000 at 19% which would be worth £24,700. From April 2023, the additional deduction will be £86,000 which would be worth £21,500. The change will impact more on companies that reduce their taxable profits below paying at the 25% rate via their R&D claims.
Other changes
The VAT threshold has also been frozen until April 2026 which is bad news for micro businesses. From April 2025, there will be no further favourable treatment of electric vehicles for the purposes of Vehicle Excise Duty. Fuel duty is set to increase by 23% in March 2023, increasing the cost of a litre of petrol by circa 12p.
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