AUTUMN STATEMENT 2022
by Nick Antoniou, FCCA of NA Associates LLP, Chartered Certified Accountants.
“British families make sacrifices every day to live within their means, and so too must their government, because the United Kingdom will always pay its way.” – Chancellor Jeremy Hunt
As Jeremy Hunt took to the dispatch box just 34 days after taking on the role of Chancellor of the Exchequer, all eyes were on him.
Following the dramatic sacking of Kwasi Kwarteng after his October mini-budget unleashed market turmoil, a swift change in Prime Minister, and an ever-burgeoning cost of living crisis, Hunt promised that today’s Autumn Statement (delayed from 31st October) would ensure his tax and spending plans would “stand the test of time”.
Acknowledging that the UK is currently in recession while reiterating that the Government’s three-fold priorities (stability, growth and public services) will help rebuild the economy and reduce debt, Hunt went on to announce a barrage of tax hikes, spending cuts and threshold freezes.
Personal Tax changes
A few changes for individuals had already been confirmed ahead of the Autumn Statement, either as part of Kwarteng’s mini-budget or its aftermath:
● Basic-rate income tax remains at 20% “indefinitely”.
● National Insurance increase has been scrapped. The National Insurance rise of 1.25 percentage points, which took effect in April this year, was reversed as part of the mini budget. This measure has been kept in effect, along with the cancellation of the April 2023 health and social care levy.
● Dividend tax rates will remain unchanged. These also increased by 1.25 percentage points alongside National Insurance this April, and Hunt has confirmed they will remain at their increased levels from April 2023.
Additional-rate income tax
One of the biggest announcements made by the Chancellor was the lowering of the additional-rate tax threshold from £150,000 a year to £125,140 as of 6 April 2023.
This announcement is in stark contrast to Hunt’s predecessor’s plans to scrap the additional tax rate altogether.
Income tax thresholds
The personal allowance threshold will remain frozen for a further two years, continuing until 2028, along with the higher-rate threshold and the National Insurance contributions (NICs) thresholds.
Some are referring to this as a ‘stealth tax’ – where wage increases over time will cause people to find themselves caught in higher tax bands, potentially negating pay rises.
In July 2022, NICs thresholds were increased to be brought in line with the income tax personal allowance and fixed until April 2026. The Chancellor announced that this freeze will be maintained for an additional two years, until April 2028.
Capital gains tax
In the statement, the Chancellor announced a cut to the capital gains tax (CGT) allowance, also known as the annual exempt amount, over the next two years.
The original allowance of £12,300 will be cut to £6,000 for the tax year 2023/24 and will then be halved again to £3,000 in 2024/25. This means a couple’s allowance will be reduced to £12,000 and £6,000 respectively.
The inheritance tax nil-rate is currently set at £325,000 until April 2026 and will remain at this rate for a further two years until April 2028.
The residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will still start at £2 million.
Qualifying estates will still be able to pass on up to £500,000, with the qualifying estate of a surviving spouse or civil partner remaining at £1m without inheritance tax liability.
The threshold freeze is seen by some as a way to increase inheritance tax bills without directly changing the rate. Due to the increase in house prices, more and more people will face higher inheritance tax bills when dealing with an estate.
The Chancellor announced that the dividend tax threshold will be slashed from £2,000 to £1,000 from April 2023 and then again to £500 the following year.
Regardless of your tax band, anyone who receives dividends will be affected by the change.
Changes for businesses were also confirmed following Kwarteng’s September mini-budget:
● Corporation tax rises to 25% from 1 April 2023. This increase will go ahead, despite previous plans to scrap it. The full 25% rate will apply to profits of £250,000 and over, while companies with profits up to £50,000 will continue to pay at 19%. Profits between these two figures will be subject to a tapered rate.
● IR35 reforms to stay. Planned changes to IR35 will no longer be repealed, reportedly saving some £2bn in tax.
● Bankers’ bonus cap abolished. One of the mini-budget measures left untouched by Hunt was the decision to lift the cap on bankers’ bonuses, which currently stands at 100% of a banker’s annual salary, or 200% depending on shareholder approval.
The employment allowance will remain at its current level of £5,000, having increased to that amount in April 2022.
The Chancellor confirmed that a business rates revaluation will still take place in April 2023, but also announced a set of other more detailed changes.
In response to recent increases to energy prices, Hunt announced that the current energy profits levy will be extended until March 2028, as well as increasing its rate from 25% to 35% from 1 January 2023.
A new, temporary levy will also be introduced for electricity generators. This will apply at 45% on excess returns, also from 1 January 2023 to 31 March 2028.
Annual investment allowance
One thing not mentioned directly in the Chancellor’s speech, but included in the accompanying documents, is the decision to permanently set the annual investment allowance (AIA) at £1m for businesses.
The additional deduction for SME R&D relief will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. Meanwhile, the research and development expenditure credit (RDEC) rate will increase from 13% to 20%.
• Pension triple lock upheld
• Electric vehicles will no longer be exempt from vehicle excise duty from April 2025
• Stamp Duty
One of a few measures to remain initially unchanged from the mini-budget was the decision to raise the threshold at which stamp duty land tax is paid (in England and Northern Ireland) from £125,000 to £250,000. For first-time buyers, the threshold increased from £300,000 to £425,000.
• National living wage will increase by 9.7%, to £10.42 an hour. This rate applies to people aged 23 and over and is said to equal an extra £150 per month.
The registration and deregistration thresholds will remain at their current levels of £85k and £83k respectively until 1 April 2026.
• Energy bills support
The current energy bill support scheme – the energy price guarantee – only runs until April 2023, with a price guarantee levied to help British taxpayers with their rising bills.
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This article is intended is based on our understanding of the 2022 Autumn Statement, and does not constitute advice or a recommendation. Professional advice should be taken on your specific circumstances. You should not make any decisions based upon the contents of this article.
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