Autumn Statement

17 November 2022

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This feels very much like some form of tax announcement Groundhog Day, but also not – weren’t we here nearly 2 months ago when a wave of tax cuts were announced? Even more odd in this context (or not, given the debatable link between the “mini-Budget” and the impact on public finances) that it also feels very much like austerity 2.0 (austerity part 1 starting over a decade ago).

Today, the Chancellor (our 4th of 2022!), stood and made the long awaited Autumn Statement announcement that the Government will desperately want to assist in rebuilding it’s own Party’s reputation regarding public finances and to attempt to provide ‘the markets’ with a degree of confidence.

Rumours have been flying around in recent weeks, and more than before any tax announcement I have experienced! We discussed internally in the week that there are so many rumours that the cynic in you felt that these were being pushed out as a swamping tactic so that we didn’t know what to think was true (my mind wandered to the Crystal Maze dome challenge where contestants were flooded with so many tickets blown into the dome that the valuable golden tickets proved so elusive!), and to anticipate the worst so that the actual announcements were seen as “not being so bad”.

From a purely tax perspective, many may be excused for thinking the announcements “weren’t so bad”, however, things like the freezing of tax thresholds when we are experiencing rates of inflation that we are, are significant tax rises in all but name.

Our initial summary of the headline tax announcements is as follows:
  • A freeze on many tax thresholds until the 2028/29 tax year (6 years away – previously frozen until April 2026) – including the income tax personal allowance, higher-rate income tax threshold, NIC thresholds and bands, and inheritance tax standard nil-rate band and residence nil-rate band;
  • The additional-rate income tax threshold (at which the 45% income tax rate (39.35% for dividend income) is payable) will reduce from £150,000 to £125,140 from the 2023/24 tax year onwards – showing a stark contrast to the “mini-Budget” on 23rd September 2022 where the additional-rate was to be scrapped;
  • The capital gains tax annual exemption reduced from the current £12,300 for individuals to £6,000 for the 2023/24 tax year, and then further reduced to £3,000 in 2024/25 – I question the motive here. The increased tax take will surely be wiped out by the additional administration for HMRC (the reduced allowance meaning more taxpayer’s are required to file self-assessment tax returns, complete CGT returns for residential property etc).
  • Dividend allowance will be reduced from £2,000 to £1,000 for the 2023/24 tax year, and further reduce to £500 for the 2024/25 tax year (a 10th of the original dividend allowance when it was created!) – again, I question the motive here for the reasons outlined above regarding the CGT annual exemption reduction.
  • The SDLT changes for residential property announced at the “mini-Budget” (when of the few measures that stayed!) will be kept in place until 31 March 2025;
  • The Business Rates revaluation will go ahead and come into effect on 1 April 2023, based on property values from 1 April 2021. The Business Rates multiplier is to be frozen for another year (in 2023/24), and the Retail, Hospitality and Leisure relief scheme is being extended from 50% to 75% for 2023/24, up to £110,000 per business – this will be welcome for many businesses in Cornwall.
  • No increases in the capital gains tax rates were announced, as was strongly rumoured – a phoney win for some!
  • No changes to higher-rate income tax relief on pension contributions were announced, which was, again, strongly rumoured – how many times has this been the case now? Another phoney win for some!
  • No changes to Stamp Duty Land Tax that HMRC had previously consulted on (here) – which was surprising.
  • Increased to the National Living Wage and National Minimum Wage from 1 April 2023 – the National Living Wage for those aged 23 and over will increase to £10.42.
  • The VAT registration and de-registration thresholds will be frozen until April 2026.
  • Changes to Research and Development (R&D) tax relief were announced that will make the relief much less attractive for SME limited companies – from 1 April 2023, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. The credit rate for the large company scheme will increase from 13% to 20%. This clearly shows the government’s thoughts about where to focus the benefit for incurring qualifying R&D expenditure.
  • Tariff suspensions on over 100 goods were announced for a period of 2 years “to help put downward pressure on costs for UK producers.” – suggests an indirect admission around the impact of Brexit?
  • Electric cars will be subject to Vehicle Excise Duty from April 2025, and the company car benefit-in-kind percentage will increase by 1% in each of the coming 3 tax years – increasing to 5% in 2027/28.
  • The 100% ‘first year allowance’ capital allowance for installation of an electric charging point will be extended to 31 March 2025/5 April 2025 (limited companies/unincorporated businesses).

We will be following-up tomorrow with a more detailed PDF summary of the announcements. I hope that this proves useful for today.

Let’s hope that’s it for tax announcements for 2022!