Autumn Statement – What does it mean for you?

Tax Briefing September 2021

The chancellor today announced tens of billions of tax rises and spending cuts in the Autumn Statement, in a bid to bridge the deficit, and help rebuild the economy.

It has been less than 8 weeks since the former chancellor's mini-budget, which was on the whole cancelled on the arrival of Mr Hunt.

Income Tax

As previously announced, the proposed reduction of basic rate income tax to 19% will not go ahead, and will remain at 20%.

The abolition of the additional rate tax (45%) will now not take place, and infact, the threshold will be reduced to £125,140 (from £150,000) as from April 2023.

It should be noted that the tax free personal allowance is reduced by £1 for every £2 of income over £100,000. This results in an effective tax rate of 60% on earnings between £100,000 and £125,140.

The personal allowance of £12,570 will be frozen until April 2028. This will result in more people being brought into taxation as their income increases.

Dividend Allowance

The dividend allowance of £2,000 will be reduced to £1,000 from April 2023 and then to £500 from April 2024.

The additional 1.25% tax on dividends will continue to go ahead as from April 2023.

Capital Gains Tax

The annual allowance of £12,300 will be reduced to £6,000 in April 2023 and then to £3,000 from April 2024.

The reduction to the annual allowance could result in extra CGT of over £2,600 from April 2024.

Trusts generally have the benefit of a CGT annual allowance of 50% of that available to individuals.

National Insurance

The NIC secondary threshold for employers will remain at £9,100 until April 2028, which will ultimately result in increased NIC costs for businesses.

Class 1 NIC is paid by employees on earnings over £12,570, the same limit as the tax free personal allowance. The same threshold applies to Class 4 NIC, paid by the self employed.

The employment allowance will remain at £5,000, meaning the first £5,000 of employers NIC will be covered by the allowance.

Although much of the mini-budget by the previous chancellor was cancelled, the reduction to the main rates of NIC were not. As a result, employees will pay the main rate at 12% and self employed 9%.

Corporation Tax

The planned increase to the corporation tax to 25% for companies with profits in excess of £250,000 will go ahead as from April 2023.

Companies with profits of below £50,000 will continue to pay tax at 19%.

Although these are the headline rates, the effective tax rate on profits between £50,000 and £250,000 is actually 26.5%.

Minimum Wages

The national living wage for over 23 year olds will increase to £10.42 per hour.

Rate from April 2023

Current Rate

Increase

National Living Wage

£10.42

£9.50

9.7%

21-22 year old

£10.18

£9.18

10.9%

18-20 year old

£7.49

£6.83

9.7%

16-17 year old

£5.28

£4.81

9.7%

Apprentice rate

£5.28

£4.81

9.7%

Businesses need to consider the increases coming into effect from April 2023.

R&D Tax Relief

The R&D Relief for SME's will be cut to 86%, and the tax credit rate cut to 10%

VAT

The VAT registration threshold will remain at £85,000, with the de-registration threshold remaining at £83,000, until at least April 2026.

Electric Cars

With the increase in electric cars, the government have announced that Vehicle Excise Duty will become payable on Electric cars, vans and motorcycles as from April 2025.

Business Rates

In a bid to support businesses and the high street, the government announced £13.6 billion of support for businesses over the next 5 years. This includes freezing the multipliers and increasing relief for retail, hospitality and leisure to 75%.

Capital Allowances

The £1m annual investment allowance has been made permanent, which amounts to full expensing of capital expenditure for an estimated 99% of UK businesses.

Inheritance Tax

The Inheritance Tax Nil Rate bands will be frozen until March 2028.

SDLT

The chancellor maintained the SDLT cuts announced by the previous chancellor (i.e. 0% SDLT for residential properties to £250,000). However, he did state that the cuts are temporary and would be in place until April 2025.

Windfall Tax

In a bid to obtain extra tax from those businesses making extraordinary profits due to external factors (i.e. oil companies), the government is extending the Energy Profits Levy to the end of March 2028 and increasing the rate from 25% to 35% as from January 2023.

If you want to know how the Autumn Statement affects you, get in touch with one of our tax advisers, who will be happy to assist.

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Wednesday, 28 February 2024

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