Yesterday we had the first Autumn statement from the newly appointed Chancellor.
Jeremy Hunt was faced with a challenging economic backdrop to his first major set piece. He is grappling with a combination of over 11% inflation, a recession, and the need to re-establish the UK’s financial credibility following the turmoil of September’s mini budget
Mr Hunt’s position was not an enviable one. His long-term focus is on stability, growth and public services. Most of the attention, however, centers on the balance he attempted to strike between tax increases (real and stealth) and spending cuts to fill the £50 billion hole he has inherited.
So, let’s look at each area of that will have an impact on your taxes:
PERSONAL TAX
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Income tax
The personal allowance will remain at £12,570 for an extra two tax years until 5 April 2028 and the higher rate threshold will stay at £50,270.
From 2023/24, the 45% additional rate threshold will be reduced from £150,000 to £125,140.
The blind person’s allowance will be increased to £2,870 for 2023/24.
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Dividend tax
The dividend allowance will be halved to £1,000 for 2023/24 and halved again in 2024/25 to £500.
Remember the income tax rates applied to dividend income outside of the allowance have only recently been increased to 8.75%, 33.75% and 39.35% (for dividend income falling into basic rate, higher rate and additional rate bands respectively).
Combined, these measures will mean an increase in tax on dividend income.
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National insurance contributions (NICs)
The class 1 primary threshold and class 2 lower profits limit will remain aligned with the personal allowance (£12,570) until April 2028.
The upper earnings limit and class 4 upper profits limit will remain aligned to the higher rate threshold at £50,270 through to April 2028.
The lower earnings limit (£6,396) and the small profits threshold (£6,725) will remain unchanged in 2023/24.
For 2023/24, the class 2 rate will be £3.45 a week and the voluntary class 3 rate will be £17.45 a week.
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Capital gains tax
In 2023/24, the annual exempt amount for individuals and personal representatives will be reduced to £6,000 and then halved to £3,000 in 2024/25.
The annual exempt amount for most trusts will be cut to £3,000 (minimum £600) in 2023/24 and then halved in the following year.
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Inheritance tax
The nil rate band for 2026/27 and 2027/28 will remain at £325,000.
The residence nil rate band (RNRB) will likewise stay at £175,000 and the RNRB taper will continue to apply where the value of the deceased’s estate is greater than £2 million.
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Stamp duty land tax (SDLT)
The SDLT cuts affecting residential property in England and Northern Ireland, which were introduced in the ‘mini-Budget’ on 23 September 2022, will be reversed from 1 April 2025.
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Company cars and vans
The benefit-in-kind (BIK) appropriate percentages for electric and ultra-low emission cars will increase by one percentage point each year from 2025/26 to 2027/28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars.
The BIK rates for all other vehicle bands will be increased by one percentage point for 2025/26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026/27 and 2027/28.
For 2023/24 car and van fuel benefit charges and the van benefit charge will increase in line with CPI.
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Electric vehicles
Electric cars and vans will become subject to vehicle excise duty (road tax) from 1 April 2025.
BUSINESS TAXES
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Employer NICs
The level at which employers start to pay employer NICs for their employees will remain at the current £9,100 until April 2028. The employment allowance will stay at £5,000.
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Value added tax (VAT)
The VAT registration and deregistration thresholds will stay at their current levels of £85,000 and £83,000 respectively for a further two years from 1 April 2024.
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Business rates
Business rate bills in England will be updated from 1 April 2023 to reflect property values on 1 April 2021. Transitional relief over the next five years will support businesses as they move to their new bills.
Business rates multipliers will be frozen in 2023/24 at 49.9p and 51.2p, avoiding potential increases to 52.9p and 54.2p.
Support for eligible retail, hospitality and leisure businesses will be extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023/24.
Increases in the bills will be capped at £600 a year from 1 April 2023 for the smallest businesses that lose eligibility or see reductions in the supporting small business scheme or rural rate relief.
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Energy bill relief scheme (EBRS)
The government’s review of the EBRS, which offers support to non-domestic energy consumers currently up to March 2023, will be published by 31 December 2022. The government recognises that some businesses may need support beyond March 2023, but such support will be significantly lower and targeted.
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Research and development (R&D) tax reliefs
For R&D expenditure after 31 March 2023:
- the R&D expenditure credit rate will increase from 13% to 20%;
- 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%.
As announced in the Autumn Budget 2021, qualifying expenditure will be expanded to include data and cloud costs and support will be focused on innovation in the UK.
The government will consult on the design of a single R&D tax relief scheme for all businesses. If you have any questions on R&D please email our director Ian Meaburn as this is one of his specialist areas.
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National living wage (NLW) and national minimum wage (NMW)
The government has accepted the recommendation of the Low Pay Commission to increase the NLW for individuals aged 23 and over by 9.7% to £10.42 an hour from 1 April 2023.
NMW rates for younger workers and apprentices will be increased by similar percentages.
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First-year allowance for electric vehicle charge points
The 100% first-year allowance for electric vehicle charge points will be extended to 31 March 2025 for corporation tax and 5 April 2025 for income tax.
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Investment zones
The government will refocus the investment zones programme to create a limited number of high potential clusters, working with local stakeholders, to be announced in the coming months. Existing expressions of interest will not be taken forward.
OTHER ANNOUNCEMENTS
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State pensions and social security benefits
All UK-wide benefits, including state pensions (under the ‘triple lock’) and the standard minimum income guarantee in pension credit will increase by 10.1% from April 2023. Plans to create a new housing element of pension credit to replace pensioner housing benefit are now intended to take effect in 2028/29.
The benefit cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults, the national cap will increase from £13,400 to £14,753 and the cap in Greater London will rise from £15,410 to £16,967.
Households on means-tested benefits will receive an additional £900 cost of living payment in 2023/24. Pensioner households will receive an extra £300 cost of living payment, and individuals on disability benefits will get an extra £150 disability cost of living payment.
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Energy price support
The domestic energy price guarantee (EPG) will increase to £3,000 for one year from 1 April 2023 and equivalent support will continue to be provided in Northern Ireland. However, the parameters of the EPG scheme may be revised.
The support for households that use alternative fuels, such as heating oil, to heat their homes will be doubled to £200 for 2022/23.
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Council tax in England
Local authorities in England will be able to increase council tax by up to 3% a year from April 2023 without needing to hold a referendum. Authorities with social care responsibilities will also be able to increase the adult social care precept by up to 2% a year.
AND REMEMBER…
As previously announced and as we head into 2023;
- The £1million Annual Investment Allowance – giving 100% tax relief to businesses investing in qualifying plant and machinery – is now permanent.
- The Government is increasing the generosity and availability of certain Venture Capital Schemes, including the Seed Enterprise Investment Scheme for start-up companies.
With a full Budget still likely in the Spring, there is much to inform your tax and financial planning for the remainder of the current tax year.
If you have any questions about how the Autumn Statement affects you, please get in touch. Contact your manager at Myers Clark for further information.
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