Autumn Statement

The UK Chancellor of the Exchequer, Jeremy Hunt, published his Autumn statement on 17 November 2022.  The various measures included in the Statement are aimed at “strengthening public finances, bringing down inflation and protecting jobs”. This includes “necessary and fair tax changes” to raise around £25 billion.

Income Tax, National Insurance and Personal Allowance

• The UK income tax higher rate threshold, which is already fixed at its current level of £50,270 until April 2026, will be maintained for an additional two years until April 2028

• The threshold at which higher earners start to pay the 45p rate will be reduced from £150,000 to £125,140 from 6 April 2023

• The National Insurance contributions (NICs) upper earnings limit (UEL) and upper profits limit (UPL), which are already fixed at their current levels until April 2026, will also be maintained for an additional two years until April 2028

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

• The Personal Allowance, which is already fixed at the current level of £12,570 until April 2026, will be kept at the same rate for an additional two years until April 2028

As earnings increase, these measures will result in there being more higher rate taxpayers.  This is often referred to as ‘fiscal drag’ because it will raise more tax without actually increasing income tax rates.

Individuals, whose income exceeds £125,140, will no longer be entitled to a personal allowance and from April 2023 will move straight into 45% income tax.

Note that, for Scottish taxpayers, income tax rates and thresholds are, for certain income types, separately set by the Scottish government. The Scottish Budget is scheduled for 15 December2022 and we will publish the details of this in a separate blog at that time.

Other Allowances

• The Married Couple’s Allowance will be increased by 10.1% for 2023/2024 and will be valued at between £4,010 and £10,375

• The Blind Person’s Allowance will also be uplifted by 10.1% for 2023/2024 and will be valued at £2,870

Dividend Allowance

• The Dividend Allowance will be reduced from £2,000 to £1,000 in 2023/2024 and then to £500 from April 2024

The details of the dividend tax rates were announced on 17 October 2022.

https://jsca.co.uk/uk-chancellor-brings-forward-further-medium-term-fiscal-plan-measures/

These measures will mean that those reliant on dividend income will pay more tax.

If you are a director/shareholder, please contact us to discuss the best strategy for extracting profits from your company from 6 April 2023.

Capital Gains Tax

• The Capital Gains Tax Annual Exemption allowance will be reduced from £12,300 to £6,000 from 2023/2024 and then to £3,000 from 2024/2025

These changes will mean that those disposing of investments such as shares, second homes and buy-to-let properties will pay more tax.

If you are planning any capital disposals, please contact us to discuss the best strategy for the timing of the sale.

Inheritance Tax

• The inheritance tax nil-rate bands, which are already set at current levels until April 2026, will stay fixed at these levels for a further two years until April 2028.

The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million.

Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an IHT liability.

Employer’s National Insurance Contributions

• The threshold for employer’s National Insurance contributions will be fixed until April 2028

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

Corporation Tax

• As confirmed last month, the main rate of Corporation Tax will increase to 25% from April 2023

VAT Registration Limit

• The VAT registration threshold continues to be frozen at £85,000, instead of increasing each year in line with inflation. This will remain the case until March 2026

Cars and Vans

• For those provided with an electronic or ultra-low emission company car (emitting less than 75g of CO2 per kilometre), there will be annual increases in the benefit-in-kind percentages, and therefore the taxes paid by both employees and employers, from the 2025/2026 tax year

• For all other company car users, there will be a 1% increase (up to a maximum of 37%) in the calculation of the benefit-in-kind for 2025/2026. This will then be fixed for the following two tax years.

• The fixed multipliers used to calculate benefits-in-kind on employer provided vans, van fuel (for private journeys in company vans) and car fuel (for private journeys in company cars) will increase in line with the Consumer Price Index (CPI) from 6 April 2023

• Vehicle Excise Duty on electric cars, vans and motorcycles will be introduced from April 2025

• The government will legislate in the Spring Finance Bill 2023 to extend the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for corporation tax purposes and to 5 April 2025 for income tax purposes

Research & Development (R&D)

The Chancellor again expressed concerns about the alleged abuse of Research & Development (R&D) tax reliefs.

Alongside plans to merge two existing schemes in the future, he announced that, from 1 April 2023:-

• The Research and Development Expenditure Credit (RDEC) available to non-SME companies would be increased from 13% to 20%

• For SME companies, the additional R&D tax relief deduction will be reduced from 130% to 86%

• For loss-making SME companies, the payable credit will be reduced from 14.5% to 10%

Stamp Duty Land Tax (does not apply in Scotland)

• The changes to Stamp Duty Land Tax (SDLT) announced on 23 September 2022 are to be temporary changes and from 1 April 2025 the thresholds will return to their original rates

https://jsca.co.uk/the-uk-governments-growth-plan/

The Energy Price Guarantee

• The Energy Price Guarantee currently in place will cap “typical energy bills” at £2,500 over the winter

• The UK Government will continue to provide support from April 2023 when the cap will rise to £3,000. This apparently equates to an average of £500 support for households in 2023/2024

Benefits and National Living Wage

• Working age benefits will rise by 10.1%

• The Triple Lock will be protected and therefore pensioners will receive a rise in the State Pension and the Pension Credit in line with inflation

• The National Living Wage will be increased by 9.7% to £10.42 an hour

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

 

Photo by Chris Flexen on Unsplash