We've got Autumn Statement news for you

So, there we have it. The anticipation’s finally over and we can put an end to the speculation.

The Chancellor Jeremy Hunt’s delivered his Autumn Statement (Budget), today, Thursday 17^th November 2022 under the new Prime Minister, Rishi Sunak. Originally due to be announced on 31^st October, the statement’s set out the UK’s medium term spending plans. (Click here for a recap of the spring statement).

What ‘difficult decisions’ on tax and spending to repair the country’s £50bn fiscal black hole has the Chancellor made?

Here’s our team’s digest…

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Debbie Ince, Head of Tax Compliance at Fortus shares, “The tax burden’s the highest it’s been for 70 years and that’ll only increase as a result of today’s Autumn Statement. Today, the Chancellor’s announced that personal tax allowances will be frozen until April 2028 which will unfortunately draw more people into paying higher rates of tax, a classic stealth tax. No changes were announced to inheritance tax other than to freeze the nil rate band for a further 2 years until April 2028.”

“Tax burden reaches 70-year high & set to increase by another 1%.”

Senior Tax Manager, Amanda Burrows adds, “The level at which additional rates of tax of 45% are paid has been reduced from £150,000 to £125,140 from April 2023. This will bring many more taxpayers into these additional rates. Combined with the withdrawal of personal allowances for income over £100,000, this will again increase the tax burden for higher rate taxpayers.”

“When it comes to capital taxes, the annual tax-free amount’s been reduced from £12,300 to £6,000 from April 2023, which will reduce further to £3,000 from April 2024. This could impact those with investment portfolios and any smaller capital gains that would’ve been outside of paying Capital Gains Tax,” says Louise McGowan, Tax Manager.

Personal allowances & tax bands

These have been frozen until April 2028, making it a stealth tax rather than a tax increase.

Tax free dividend allowance

Debbie says, “The tax-free dividend tax allowance’s being reduced from £2,000 to £1,000 in April 2023 and then to £500 from April 2024. As well as impacting owner managed businesses, this will impact individuals with personal investment portfolios whose small dividend income has previously meant they weren’t included in the self-assessment regime – that may now change.”

dividend rates

There aren’t any immediate plans to align dividend rates with other earned income tax rates.

national living wage 

The National Living Wage will rise from £9.50 to £10.42 an hour for those aged 23 and above – a welcome 9.7% increase that represents an annual pay rise worth over £1,600 to a full-time worker.

Higher rate threshold

The higher rate threshold’s to be reduced from £150,000 to £125,140, so the 45% rate will apply at lower income levels.

rate of tax

The loss of personal allowances on income over £100,000 means the effective 60% rate of tax remains.

Capital Gains Tax

Amanda says, “The good news is, despite warnings, capital gains tax rates haven’t been aligned with income tax rates. It’s going to be reduced from £12,300 to £6,000 from April 2023 and will reduce again in April 2024 to £3,000.”

vehicle excise duty

From April 2025, electric cars will no longer be exempt from Vehicle Excise Duty.

bik tax rates

Benefit-in-Kind (BiK) tax rates on electric cars will increase by 1% year-on-year until April 2028.

Corporation Tax

The decision to raise corporation tax to 25% from April 2023 (as planned) means the UK will no longer have the lowest rate of Corporation Tax in the G20. Instead, UK businesses will need to pay more attention to the mitigation of UK Corporation Tax through Capital Allowances and pension planning.

The super deduction for Capital Allowances will end on 31st March 2023, so there’s limited opportunity to take advantage of this relief.

R&D

“R&D’s been an important relief for entrepreneurial small businesses as they seek to develop new products. From April 2023, there will be a significant reduction in the SME tax relief, with the additional deduction being reduced from 130% to 86%. At the same time, the SME credit will reduce from 14.5% to 10%. The idea’s to move towards a single, less generous and more complex RDEC scheme for which the tax relief will be increased from 13% to 20% with effect from April 2023,” says Nigel Syson, Associate Director – Tax at Fortus.

creative sector reliefs

The HMRC’s going to consult on expanding the audio-visual creative sector reliefs to support the growth of industry.

vat threshold

The VAT threshold’s going to be maintained until April 2026. Nigel says, “This means more small businesses will enter the VAT net and consequently, experience the administrative burden that goes with it.”

when asked what these changes really mean for our clients… 

…Chris Wilson, Director – Head of Tax at Fortus said, “For many of our clients, the steadily increasing tax burden and the ongoing challenging economic environment means a greater emphasis will be placed upon planning and wealth preservation. There are still plenty of tax planning opportunities for owner managed businesses this side of a general election, which commentators expect in the Spring of 2024. As always, we encourage our clients to reach out if they need clarification on how these measures may impact them.”