Chancellor Jeremy Hunt delivered his Autumn statement on 17 November 2022.
While there were a raft of economic announcements and detailed coverage on spending plans, we consider the key changes to tax rules below:
Top Tax Rate
The 45% tax rate stays in place with the Chancellor extending the reach of this tax rate, lowering the point at which it kicks in from £150,000 to £125,140. This will take effect from April 2023.
The so-called top tax rate isn’t in fact the highest rate taxpayers pay. Those earning between £100,000 and £125,140 actually pay a worse marginal tax rate which is in effect 60%. This is a combination of a 40% tax rate and a loss of allowances in this band, which effectively adds another 20%. This explains why the 45% rate now kicks in at the rather specific figure of £125,140, as this is the end of the 60% tax band.
National Insurance
It has been confirmed that rates will be held at current levels. Rises to NIC rates of 1.25% were live in the current tax year, from 6 April 2022, but this 1.25% increase was undone from 6 November 2022.
Dividend Tax
Dividend tax rates were put up by 1.25% to align with the NIC increase. While the NIC increase has been cancelled, the dividend increase remains. Basic, Higher, and Additional-Higher dividend tax rates are now 8.75%, 33.75% and 39.35%.
From April 2023 the top rate of dividend tax will also kick in at the new lower threshold of £125,140.
Additionally, the dividend allowance (the amount that can be received before tax) is being cut. This was initially £5,000 when first introduced. More recently it has been £2,000 for a number of years. But in April 2023 it will fall to £1,000 and then down to £500 in April 2024.
Capital Gains Tax Allowance
The threshold for this has been around £12,000 for a number of years. Capital gains made below this threshold do not generate capital gains tax. The threshold is falling to £6,000 in April 2023, and halving again to £3,000 in April 2024. A couple disposing of a joint property would currently get £24,600 of the gain covered by exemptions. Selling that property after April 2024 they will only have £6,000 covered by exemptions potentially leaving an additional £18,600 exposed to capital gains tax (typically at 28%).
Stamp Duty
One change of Kwarteng’s mini-budget that has not been reversed is the increase of the threshold at which residential SDLT is charged to £250,000. However, Jeremy Hunt has said this measure is currently temporary until March 2025; the threshold may be reduced at that point.
Corporation Tax
It has been confirmed that the rate will rise to 25% from April 2023. Companies with profits below £250,000 will pay lower rates. Companies with profits below £50,000 will still pay 19%.
R&D Tax Relief Changes
Branded a ‘rebalancing’ of the current two R&D schemes along with an announcement that they will be merged in the future. The rate of relief for ‘large’ business claims was increased. While the rates available for SME claims has been reduced. The SME rates from 1 April 2023 will be:
- Enhanced expenditure deduction, cut from 130% to 86%
- Repayable tax credit for loss making companies, cut from 14.5% to 10%
Business Rates
The next revaluation exercise will go ahead as planned in April 2023 which Hunt warned could lead to additional inflationary costs. To help businesses with this a transitional business rates relief scheme was announced including £13.6 billion of business rates support. Business Rates multipliers will be frozen from 2023/24 and relief will be increased for businesses in the retail, hospitality and leisure sectors.
Additional Announcements
- From April 2023 the Energy Price guarantee for households will be extended by a year, but the cap also raised from £2,500 to £3,000. As before, this cap isn’t a limit on total bills, but a cap on unit prices so that the ‘average user’ can expect to pay £500 more a year on utilities.
- Most income tax thresholds and allowances frozen for the next few years, despite high levels of inflation.
- Pension triple lock preserved.
- Electric cars will have to start paying road tax from April 2025.
- Windfall tax on energy firms increased from 25% to 35%
- New Electricity Generator Levy introduced. This will be a temporary 45% tax levied on larger electricity generators who have achieved extraordinary returns (over £10m) due to the high levels of energy prices.
Should you wish to know more about how any of these changes might affect you, or your business, please contact your Relationship Partner or James May.