Autumn Statement 2022 summary: key points and changes

17 November 2022

Topics:

Budget

Jeremy Hunt, the fourth in a line of newly appointed Chancellors this year, today delivered his first Autumn statement revealing a package of tax and spending changes aimed at what he hopes will stabilise the economy.

The Chancellor has already reversed many of the tax proposals announced by his predecessor in the emergency budget in September but there were further announcements today. There are some immediate tax rises with changes in headline rates and exemptions but others will impact more slowly through the extended freezing of tax rate thresholds.

The main headline tax changes are outlined below. We await further details to be released to fully consider the ramifications from today’s announcements.


Personal taxation

  • A decrease in the additional rate threshold from £150,000 to £125,140 from 6 April 2023 meaning that top earners in England, Wales and N Ireland, will pay tax at 45% at a lower point. The reduction in the threshold for unearned income will apply UK-wide.

  • The basic rate of income tax will be maintained at 20%.

  • The reversal of the Health and Social Levy of 1.25% for employed workers is confirmed.

  • 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. As salaries rise with inflation, more individuals are brought within the tax/NIC net, while others fall into the higher tax thresholds.

  • The dividend allowance on unearned income currently £2,000, will reduce to £1,000 from April 2023 and to £500 from April 2024. Dividends will not benefit from the reversal of the Health and Social Levy so the rates, increased from April 2023, will remain in place as 8.75%, 33.75% and 39.35% for basic rate, higher rate and additional rate taxpayers respectively.

  • No changes announced in respect of headline rates of capital gains tax or reliefs such as Business Asset Disposal Relief. However, the CGT annual exempt amount will be cut from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

  • No changes to headlines rates to Inheritance tax or reforms to Business Property Relief were announced. The nil rate band for IHT, frozen since 2009, will remain frozen at £325,000 until April 2028, a period of nearly 20 years. The main residence nil rate band has also been frozen at £175,000 until 2028 and the threshold at which the relief is tapered will continue to be £2m until April 2028 at the earliest.

 

Business taxation

  • 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, as previously announced. Companies with profits between £50,000 and £250,000 will be subject to marginal rates. Thresholds will be split between associated companies, broadly those under common control. Given the increase in corporate and dividends rates, it may be more efficient to pay bonuses rather than dividends for those companies suffering 25%. The numbers are worth crunching.

  • As previously announced, the £1m Annual Investment Allowance in respect of capital allowances will be made permanent. No announcements on the Super Deduction which is due to end on 31 March 2023.

  • Research and Development relief for SMEs will reduce from 130% to 86% and the credit rate from 14.5% to 10%. The Research and Development Expenditure Credit will however increase from 13% to 20%. These changes will be disappointing to many smaller businesses but for those paying corporation tax at 25% after April 2023, the effective rate of tax will only reduce the value of this vital source of funding by 3.5%.

  • 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.

 

Other taxes

  • The previously announced increase in the nil rate threshold of stamp duty land tax from £125,000 to £250,000 for all purchasers and from £300,000 to £425,000, for first time buyers of residential property in England and N Ireland will remain in place until 31 March 2025. The maximum purchase price for which first time buyers’ relief can be claimed has been increased to £625,000.

  • The VAT registration threshold of £85,000 will remain in place for two years from April 2024.

  • Windfall tax on profits of oil and gas firms increased from 25% to 35% and extended until March 2028. A 45% energy profits levy rate will be imposed on electricity generators.

 

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