Thursday 17 November 2022 marked the new Chancellor’s first Autumn Statement which announced tens of billions in tax rises and spending cuts.
Our tax specialist, Tom Moore, takes a look at some of the key points and how they will affect people and businesses.
- Income tax and National Insurance contributions thresholds have been frozen and as a result more people will be drawn in to paying income tax and at higher rates as wages and incomes rise.
- The income tax Personal Allowance (PA) and higher rate threshold (HRT), and the National Insurance contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) are already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028.
- From July 2022 the NICs Primary Threshold (PT) and Lower Profits Limit (LPL) were increased to align with the PA and will be maintained at this level from April 2023 until April 2028.
- The Class 2 Lower Profits Threshold (LPT) will also be fixed from April 2023 until April 2028 to align with the LPL.
- The PA, PT, LPL and LPT will remain at £12,570 and the HRT, UEL and UPL will remain at £50,270.
- The PA and NICs thresholds apply across the UK. The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland, and the HRT for savings and dividend income will apply UK-wide.
- The government will legislate for the income tax measures in Autumn Finance Bill 2022, and NICs changes in affirmative secondary legislation in early 2023.
Income tax additional rate threshold
The income tax additional rate threshold (ART) will be lowered from £150,000 to £125,140 from 6 April 2023 at an approximate tax cost of £1,200 a year for those earning over £150,000.
Dividend Allowance and Capital Gains tax Annual Exempt Amount
The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024, and reduce the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
It is estimated that these measures will raise over £1.2 billion a year, from April 2025. The government will legislate for these measures in Autumn Finance Bill 2022.
As with income tax and National insurance the Inheritance tax nil-rate band and residence nil-rate band will be frozen meaning estates will be drawn into paying inheritance tax as asset values rise. The inheritance tax nil rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further 2 years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million.
Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability. The government will legislate for these measures in Autumn Finance Bill 2022.
Married Couples’ Allowance and Blind Persons Allowance
The government will uprate the Married Couple’s Allowance and Blind Person’s Allowance by the September CPI figure of 10.1% for the 2023-24 tax year. The Married Couple’s Allowance will be valued at between £4,010 and £10,375 and the Blind Person’s Allowance will be valued at £2,870 for those who qualify.
Stamp Duty Land Tax cuts
On 23 September 2022, the government increased the nil-rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000. The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. This will now be a temporary SDLT reduction. The SDLT cut will remain in place until 31 March 2025 to support the housing market and the hundreds of thousands of jobs and businesses which rely on it.
Annual Tax on Enveloped Dwellings (ATED)
The annual chargeable amounts for the ATED will be uplifted by the September CPI figure of 10.1% for the 2023-24 ATED charging period.
Council Tax flexibility
The government is giving local authorities in England additional flexibility in setting council tax by increasing the referendum limit for increases in council tax to 3% per year from April 2023. In addition, local authorities with social care responsibilities will be able to increase the adult social care precept by up to 2% per year.
National Insurance contributions Secondary Threshold
The government will fix the level at which employers start to pay Class 1 Secondary NICs for their employees (the Secondary Threshold) at £9,100 from April 2023 until April 2028.
Bank Corporation Tax Surcharge
Following the decision to proceed with the Corporation Tax rate increase to 25% from April 2023, the changes to the Bank Corporation Tax Surcharge which are legislated to take effect from the same point will also go ahead. This means that from April 2023, banks will be charged an additional 3% rate on their profits above £100 million – meaning that they will continue to pay a higher combined rate of corporation tax than most other companies, and a higher rate than they did previously.
Maintaining the VAT registration and deregistration thresholds at the current levels for an additional 2 years
The VAT registration and deregistration thresholds will not change for a further period of 2 years from 1 April 2024. The registration threshold currently sits at £85,000.
Vehicle excise duty on Electric Vehicles (VED)
From April 2025, electric cars, vans and motorcycles will begin to pay VED in the same way as petrol and diesel vehicles.
Company Car Tax (CCT) Rates
The government is setting rates for Company Car Tax until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022. Rates will continue to incentivise the take up of electric vehicles:
- appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1 percentage point in 2025-26; a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
- rates for all other vehicles bands will be increased by 1 percentage point for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28
Van Benefit Charge and Car & Van Fuel Benefit Charges
From 6 April 2023, Car and Van Fuel Benefit Charges and van benefit charge will increase in line with CPI.
Review of the Energy Price Guarantee (EPG)
From April 2023, the government will adjust the EPG, which places a limit on the price households pay per unit of gas and electricity. This means that a typical household in Great Britain will pay £3,000 per annum (up from the current £2,500 per annum) from April 2023 to April 2024. Equivalent support will continue to be provided in Northern Ireland.
Cost of Living Payments
The government will provide households on means-tested benefits with an additional £900 Cost of Living payment in 2023-24. Pensioner households will receive an additional £300 Cost of Living payment, and individuals on disability benefits will receive an additional £150 Disability Cost of Living payment in 2023-24. These payments will be made on a UK-wide basis.
Uprating of benefits
The government is protecting the most vulnerable in society by increasing benefits in line with inflation, measured by September CPI which is 10.1% this year. Around 19 million families will see their benefit payments increase from April 2023. This includes increasing the State Pension by inflation, in line with the commitment to the Triple Lock. The standard minimum income guarantee in Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth).
If you need tax advice or support, contact Tom today by calling 01733 295 691 or by emailing firstname.lastname@example.org