The Autumn Statement 2022

The statement contained several immediate tax rises with changes in headline rates and exemptions. The Chancellor also extended the freezing of tax rate thresholds. The result is individuals, sole traders, partnerships and companies will be paying more and more tax over the years, especially given the current high rate of inflation. SMEs (businesses with less than 249 employees and less than £40 million turnover) were only mentioned three times in the Chancellor’s statement. However, this Autumn Statement will have a significant impact on them. Business owners, self-employed individuals and MDs, we suggest that you arrange a no-obligation conversation with us (link to contact us page) to see how this impacts you and your business and how you can minimise your tax bills. ## Autumn Statement Headlines * The threshold for paying the top rate of income tax will be lowered from £150,000 to £125,140 * Income tax, national insurance, personal allowance and higher rate thresholds are frozen for a further two years until April 2028 * Tax-free allowances for dividend and capital gains tax will be cut from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024 * Corporation tax rate will rise from 19% to 25% for companies with profits above £250,000 from 1st April 2023. Please see below for further details and changes. #### Key Points for Business Owners, Self Employed Individuals and MDs **The key points are:** * The basic rate of income tax remains at 20%. * The reversal of the Health and Social Levy of 1.25% for employed workers was confirmed. * A decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023. This means that top earners in England, Wales and Northern Ireland, will pay tax at 45% on earnings above £125,140. * Personal tax thresholds within income tax and national insurance (NIC), originally frozen until 2026, will remain frozen for a further two years to April 2028. With inflation currently driving pay rises by an average of 6%, more individuals will be dragged into the higher rate and additional rate bands. * The dividend allowance is currently £2,000. It will be reduced to £1,000 from April 2023 and to £500 from April 2024. The tax payable on dividend payments above the allowance remains at 8.75%, 33.75% and 39.35% for basic rate, higher rate and additional rate taxpayers respectively. * There were no changes announced in respect of headline rates of capital gains tax or reliefs such as Business Asset Disposal Relief and Business Property Relief. However, the capital gain tax annual exempt amount will be cut from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. * The level at which employers start to pay Class 1 secondary NICs, for their employees is fixed at £9,100 from April 2023 until April 2028. * The planned increase in the corporation tax rate to 25% for companies with profits above £250,000 will go ahead. Companies with profits under £50,000 will pay corporation tax at the current 19%. Those with profits between £50,000 and £250,000 will be subject to marginal rates. * The £1m Annual Investment Allowance in respect of capital allowances will be made permanent. * The VAT registration threshold of £85,000 is frozen until April 2024. * Changes to Research and Development (R&D) tax reliefs - For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%. However, 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%. * Company car rates will be set until 2028 with yearly 1% increases to provide certainty. These will continue to incentivise the take up of electric vehicles. Car and van fuel benefits and van benefits charges will increase in line with CPI. From April 2025, electric cars, vans and motorcycles will begin to pay vehicle excise duty. ### Next Steps These changes will have a significant impact on individuals and companies. We recommend that you arrange a no-obligation conversation (link to contact us page) with us to explore how this impacts you and your business and how to minimise your tax liability.