Autumn Statement 2022

On the 17th of November 2022 the Chancellor Jeremy Hunt announced important changes to tax and spending. Most of this Autumn Statement 2022 was about increasing tax to reduce the amount the government needs to borrow. Here we explain how those tax increases could affect small businesses and individuals.

Income Tax Thresholds

The Autumn Statement 2022 reduced the income threshold at which the additional rate of tax applies, from £150,000 to £125,140. This applies from April 2023. Anyone with total income over £125,140 will pay more tax of up £1,392 per year. It means that the higher rates of tax will apply to income between £37,700 and £100,000. A marginal rate of tax (20% higher than the applicable rate e.g. 60%) will apply to income between £100,000 and £125,140. That’s because the tax-free personal allowance is taken away in that band. Then the additional rate applies to income over £125,140.

Apart from dividend allowances, the other income tax thresholds have been frozen until 2028. So the tax-free personal allowance will remain at £12,570. Plus the basic rate of tax will apply to income above the personal allowances, up to a total income of £50,270.

Freezing the personal allowance and the higher rate threshold acts like a stealth tax. Effectively a tax increase without increasing the rates. As an individual’s income increases over time due to pay rises, but the tax thresholds don’t increase, they will be paying more tax and potentially move up to higher rates of tax.

National Insurance

The national insurance thresholds are also being frozen until 2028. So that’s another stealth tax. From April 2023 the class 2 rate paid by the self-employed will increase to £3.45 per week from £3.15. As previously announced, the 1.25% increase from July 2022 will end in November 2022.

Dividends

The dividend allowance means that an individual can receive a tax-free amount of dividends each year. This is being reduced in April 2023 from £2,000 to £1,000. In April 2024 it will reduce to £500. Despite the end of the 1.25% increase in NIC, there is no similar reduction to dividend tax rates. The dividend tax rates will continue with the 1.25% increase at 8.75%, 33.75% and 39.35%. For whether it is still worth trading as a company to save tax, see here.

Capital Gains Tax

Everyone has an annual exempt amount for capital gains. If you make any capital gains in a tax year you pay tax on the total gains that exceed the exempt amount. From April 2023 the capital gains annual exempt amount reduces from £12,300 to £6,000. Then from April 2024 it reduces to £3,000 for individuals or £1,500 for trustees.

Stamp Duty Land Tax

From April 2025 the recent changes to stamp duty, the tax paid when purchasing residential property, will revert back to their previous levels. So the nil-rate threshold will reduce from £250,000 to £125,000. The first-time buyers nil-rate threshold will reduce from £425,000 to £300,000. The maximum price for first-time buyers will reduce from £625,000 to £500,000.

Car Tax

From April 2025, electric vehicles will no longer be exempt from vehicle excise duty. The expensive car supplement will also start applying to new zero-emission cars.

The benefit-in-kind percentages for private use of company vehicles are increasing by 1% per year. Electric vehicles will reach 5%, ultra-low emission cars will reach 21%, and all other vehicles will go up to a maximum of 37%. These percentages are applied to the list prices to calculate the taxable value.

Research and Development

Various incentives are available for companies that incur qualifying expenditure on qualifying research and development projects. These include tax credits, and an extra deduction when calculating taxable profits/losses. From April 2023 the Research and Development Expenditure Credit will increase from 13% to 20%. The additional deduction for R&D expenditure will decrease from 130% to 86%. Also, the R&D credit for surrendering losses will decrease from 14.5% to 10%.

Other Business Taxes

The Autumn Statement 2022 also announced other measures that will affect large companies. Banks will pay an additional 3% tax on profits over £100m. The windfall tax on energy companies will increase from 25% to 30%. A temporary tax of 45% will be charged on certain low-carbon electricity generation, affecting those with high outputs and returns exceeding £10m.

Other Announcements

As well as changes that affect taxes, the Autumn Statement 2022 announced other measures that are likely to affect small businesses and individuals.

The national living/minimum wage rates will increase from April 2023 for the following ages:

• 23 and over: from £9.50 to £10.42
• 21 to 22: from £9.18 to £10.18
• 18 to 20: from £6.83 to £7.49
• Under 18 and apprentices: from £4.81 to £5.28

The energy price guarantee which currently limits a typical household bill to £2,500 per year, will increase to £3,000 from April 2023. It will end in March 2024.

Import tariff’s for over 100 types of goods are being removed for 2 years.

Pensions and benefits will increase by the rate of inflation.