Autumn Statement 2022
Over the last year, we’ve seen three prime ministers and four chancellors and their announcements have caused much confusion.
With Inflation spiralling, and acknowledging that we are now in recession, the Chancellor's Autumn Statement is the latest bid to bring “stability, growth and protection of the public service”.
First, please do not panic. This quote resonates with us now more than ever “I can’t change the direction of the Wind, but I can adjust my sails to always reach my destination.” Jimmy Dean
The next couple of years are going to be tough but there is opportunity in adversity and this is where we at Spring can assist.
Working with you to ensure records are up to date in a timely manner ensures that you’re aware of any taxes due well in advance of the payment deadline. During times of difficulty we can also assist with agreeing payment plans with HMRC to spread liabilities due.
Using this real-time data, we can prepare management information and run through this with you to keep a closer eye on your finances throughout the year. This will enable you to make strategic decisions where your competitors may not be and we can navigate this together.
It may be that we need to review whether your business is still structured in the most efficient way and we can certainly assist with that too.
This is not a time to bury your head in the sand, it is time to take action.
Here is our summary of some of the key points coming out of the Chancellor’s Statement:
Income tax thresholds to be frozen until April 2028
This is dubbed a “stealth tax” as on the face of it there are no tax rate hikes, however, this will result in millions of workers paying more tax.
You will start to pay tax at 20% on annual earnings above £12,570, this then increases to 40% on earnings over £50,270 a year. These thresholds had already been frozen until 2026, rather than increasing inline with the cost of living. The chancellor has now extended that for a further two years.
What this means is that if your wages go up, but the tax levels stay the same, you may not feel as big an impact from that wage rise as you will be paying more in tax.
The 45% tax threshold will be lowered
The higher rate of income tax which is at 45% is currently taken on earnings over £150,000, from April this has been lowered to £125,140 meaning the highest earners could pay hundreds of pounds more in income tax each year.
Dividend Allowance and Capital Gains tax Annual Exempt Amount reduced
Currently you are able to earn £2,000 of dividend income each year tax free, from April 2023, this will be reduced down to £1,000 and to £500 from April 2024.
The Capital Gain if you sell an asset such as company shares or a second home under £12,300 is exempt from tax at present. From April 2023 this amount is dropping to £6,000 and further to £3,000 from April 2024.
National Insurance Rate freeze
In July 2022, the NIC primary threshold for employees and the Class 2 Lower Profits Threshold for the self-employed were reduced. They will both now be frozen until April 2028.
Employers start to pay Class 1 Secondary NICs on their employees’ wages at £9,100. This threshold will also be frozen until April 2028.
Inheritance Tax freeze
The Inheritance Tax nil-rate bands will be frozen until April 2028.
The nil-rate band will be frozen at £325,000, and the residence nil-rate band will be frozen at £175,000. The residence nil-rate band taper will be frozen at £2 million.
Whilst the thresholds are not increased, inflation will increase the value of assets, causing more estates to be subject to this tax.
Corporation Tax increases
The Chancellor had previously announced on 17 October 2022 that the planned increases in Corporation Tax (CT) rates from April 2023 would be going ahead as follows:
Taxable profits up to £50,000 will continue to be taxed at 19%.
Taxable profits of more than £250,000 will be taxed at the main rate of 25%.
Profits between £50,000 and £250,000 will be subject to a marginal tapering relief which will be reduced for the number of associated companies and for short accounting periods.
Super Deduction allowance to end
Introduced in April 2021 to incentivise investment, providing 10% first year deduction against Corporation Tax on qualifying assets. This will not be extended and is due to end as planned in March 2023.
Companies should therefore consider ensuring that any planned purchases are in an accounting period that ends on or before 31 March 2023.
Stamp Duty Land Tax cuts
On 23rd September, purchasers of residential property welcomed an increase of the nil rate threshold of SDLT from £125,000 to £250,000 and this was further increased for first time buyers from £300,000 to £425,000. This will now be a temporary tax reduction ending in March 2025.
Electric vehicle owners to pay Vehicle Excise Duty (VED)
At present owners of electric vehicles enjoy an exemption from this tax, from 2025 this exemption will be removed. New zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year.
The Chancellor has said that Company Car tax rates for electric vehicles will remain lower than for traditionally fuelled vehicles.
Source: HM Treasury 16-11-2022
If you have any queries regarding the announcement and how you may be affected or are looking for more clarity on your day-to-day business financials, now is the perfect time to get in touch with Spring Consultancy.
This summary is to serve as a guide, it does not cover the entire Autumn Statement (which can be found on the Government website) and it should not be taken as professional advice.