The Autumn Statement 2022
Sarah Hamilton - December 2nd, 2022
The Autumn Statement (version 2) was delivered on 17th November 2022 by Jeremy Hunt, the fourth Chancellor to serve during the year.
Key points for our clients:-
- With effect from April 2023 the threshold at which the 45% rate of income tax is paid reduces from £150,000 to £125,140.
- Also from April 2023 the dividend allowance (currently £2,000 per annum) is halved to £1,000 and will be further reduced to £500 from April 2024
- The Capital Gains Tax (CGT) Annual Exempt Amount is also being reduced. In 2022/23 an individual can make gains of £12,300 before paying CGT; this exempt amount reduces to £6,000 with effect from 2023/24 and is also going to halve again in 2024/25. We expect to see a flurry of disposals prior to 6/4/2023 to take advantage of the higher Annual Exempt Amount. Going forward the low threshold will necessitate greater disclosure of relatively low value disposals/gains.
- Through the freezing of income tax, national insurance and inheritance tax thresholds for 2 further years (through to 2027/28) the Treasury expect to raise an additional £1.26 billion.
- Company cars will be taxed more. Electric cars will be taxed at 5%, low emission petrol cars at 21% and less eco friendly models by as much as 37% (rising by 1% at all levels currently below the maximum).
- Car fuel benefit and van benefit charges will rise in line with the Consumer Price Index in April.
- Research and Development Tax Reliefs are changing. Of particular relevance to our clients is that the additional deduction for qualifying expenditureby SME’s decreases from 130% to 86%, while the SME Credit Rate also drops from 14.5% to 10%.
NOT REFERRED TO in the Autumn Statement specifically but of great significance tomany of our clients is the impending increase in Corporation Tax Rates with effect from 1/4/2023. Originally announced in 2021, then cancelled in September 2022 before being re-instated in October 2021, the settled position now seems to be that with effect from 1/4/2023 the corporation tax rate for Companies with taxable profits of more than £250,000 per annum increases from 19% to 25%.
For those Companies with profits below £50,000 the 19% rate remains.
For profits between £50,000 and £250,000 the marginal rate of 26.5% will apply.
There will be significant planning issues to consider. For example:-
- The £50k/£250k limits are split between associated companies (broadly a 51% group test with a mutual control test also applying from 1/4/2023)
- The Quarterly Instalment Payment (QIP) regime is also impacted by the number of associated Companies. We anticipate reviewing group structures with our clients as in some situations it may be worth minimising the number of active associated companies.
- It will be necessary to look closely at the optimum tax efficient method of extracting profits from a Company. In recent years the dividend route has been slightly favourable compared to salaries; this may not be the case given:
- the increases in dividend tax (up by 1.25% with effect from 6/4/2022) and the reduction in the dividend allowance;
- the reversal of the National Insurance rate increase in November 2022 and repeal of the Health and Social Care levy which had been due to be introduced from April 2023;
iii) and the increases in Corporation Tax rates.
These 3 factors may swing the pendulum away from dividends back towards salary. Each case will be sensitive to individual circumstances but as ever we will seek to guide our clients to a bespoke tax efficient solution, taking all factors into consideration.
Note that the Super Deduction for qualifying capital expenditure ends on 31/3/2023. Some clients may consider accelerating investment to take advantage of the Super Deduction – again careful planning will be needed to weigh up the relief that will be secured bearing in mind the increasing corporation tax rates.
The Annual Investment Allowance remains intact at £1 million per annum.
There are a number of issues that are not yet fully clear and we expect HM Treasury to issue further regulations, especially around the National Insurance changes which have currently reverted to the rates applicable in 2021/22 but with the higher nil rate thresholds introduced to mitigate the higher rates still in place.
Our ethos at Richard Sexton & Co LLP is to continue to work with intelligence, integrity and initiative in striving to provide our clients with best possible advice for their particular situations bearing in mind the turbulent tax landscape. Do contact us to talk through any questions or concerns.