Chancellor Jeremy Hunt delivered his Autumn Statement on the 17th of November 2022. Our latest article outlines the key announcements made in the Autumn Statement.
The Chancellor of the Exchequer, Jeremy Hunt, gave his 2022 Autumn Statement to Parliament on the 17th of November 2022. Once the Chancellor finished his statement, the Office for Budget Responsibility published updated forecasts in its economic and fiscal outlook. You can read the Autumn Statement 2022 on the government’s website.
R&D Tax Relief
To increase the international competitiveness of UK businesses, the government is rebalancing the rate of R&D tax relief for SMEs and large companies (under the R&D Expenditure Credit Regime). The changes will be introduced in 2023 and are as follows:
- The rate of R&D expenditure credit will increase from 13% to 20%
- The deduction rate for the same and medium-sized enterprise scheme will be reduced from 130% to 86%
- The credit rate will decrease from 14.5% to 10%
R&D tax relief will also be reformed, and data and cloud costs will count as qualifying expenditures.
Windfall taxes on energy profits
Chancellor Jeremy Hunt announced several changes to the Energy Profit Levy – increasing it to 35% from the 1st of January 2023 and extending the duration to the 31st of March 2028. The Chancellor also announced the allowance for investment costs would be reduced to 29%.
Although a temporary measure, the 25% windfall tax on energy companies was increased to 35%. A separate levy for Electricity Generators was also announced during the Autumn Statement. From the 1st of January 2023, a temporary 45% levy on corporate electricity generators will be introduced to ensure that electricity generators pay “their fair share towards strengthening public finances”.
Global Minimum Corporation Tax Rate
The Chancellor confirmed the government’s intention to implement the Pillar Two rules issued in the draft on the 20th of July 2022. The new rules will apply to accounting periods beginning on or after the 31st of December 2023. Implementing the Pillar Two rules is anticipated to raise around £2.3 billion a year by 2027-28. It is also intended to reinforce the competitiveness of the UK in the tax market.
Chancellor Jeremy Hunt confirmed that the 2023 Rating revaluation would go ahead as planned, and the Chancellor confirmed that two-thirds of properties would see no increase to their bills next year. With the announced £13.6 billion of support for businesses over the next five years, the Chancellor announced the multiplier will be frozen for 2023/24 to help support businesses amidst rising inflation. The retail, hospitality and leisure retail relief will also be extended and increased from 50% to 70% to offer support to a further 230,000 businesses.
Downward Transition will be permanently abolished to help an additional 300,000 business properties. The Chancellor announced a new Transitional Relief Scheme (worth £1.6 billion) to support an additional 700,000 properties to adapt to their increased bills. The increase would be capped at 5% for the smallest properties. Finally, a new Support Small Business Scheme has been introduced for businesses that would lose their eligibility for either Rural Rate Relief or Small Business Relief, which will cap any increase to £50 per month.
VAT Registration threshold to remain frozen
The VAT registration threshold of £85,000 and the deregistration threshold of £83,000 will be frozen until the 31st of March 2026.
NIC Threshold Freeze
In July, the threshold at which workers start paying National Insurance Contributions (NICs) was increased from £9,880 to £12,570. In November, the Health and Social Care Levy was reversed, saving almost 30 million workers an average of £480 in total in 2023-24. However, the main NIC threshold for employers, employees and self-employed individuals will remain frozen from April 2023 – April 2028.
The Chancellor announced that the tax-free allowance for dividend income will be halved to £1,000 from the 6th of April 2023. It would be halved again on the 6th of April 2024 to £500.
Income Tax bands
The tax-free personal allowance freeze of £12,570 was previously expected to end in 2026. As part of the Autumn Statement, the Chancellor announced a two-year extension to the free until 2028. The threshold for the highest rate of income tax will also be reduced from £150,000 to £125,140.
Capital Gains Tax
The Chancellor announced that the tax-free capital gains annual exemption will be reduced from £12,300 to £6,000 from the 6th of April 2023. It will be reduced from the 6th of April 2024 to £3,000.
Inheritance tax is currently payable at 40% on any estate above £325,000. There is also a residence nil-rate band, which increases the tax-free allowance to £500,00 when the family home is passed to children or grandchildren. Both of these thresholds have been frozen until 2028.
Stamp Duty Land Tax
In September, the government increased the nil rate for all purchasers of residential property in England and Northern Ireland from £125,00 to £250,000. The threshold at which the duty was paid for first-time buyers also increased to £425,000. The Chancellor announced that the stamp duty cuts outlined in the mini-budget would remain in place, but only until the 31st of March 2025. The new plans will generate an extra £180 million from stamp duty in 2024/25, with an additional £1.6 billion in revenues annually by 2027/28.
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