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  • Writer's pictureLuciano Peria

AUTUMN STATEMENT 2022



A statement from the Chancellor of the Exchequer on 17 November 2022.


Starting with stability, the Chancellor launched straight into the changes to the tax system with two main principles in mind:


· those with more will contribute more

· avoiding tax rises that will most damage growth.


What followed was a rapid fire of figures and details of the changes to be implemented.


Income Tax


Threshold freezes and personal tax allowance measures


All the allowances and thresholds for income tax and inheritance tax are to be frozen for an additional two years, now set to end in 2028. This ‘stealth tax’ will mean as wages grow and people earn more, the tax collected by the Treasury will also grow. This will be in addition to the indefinite delay to the basic rate of tax reduction announced as part of the growth plan roll back.


Income Tax and National Insurance contributions thresholds will be fixed at their current rates until April 2028. The government will legislate for the income tax measures in Autumn Finance Bill 2022, and NICs changes through secondary legislation in early 2023.

The threshold for the additional rate of income tax will be reduced to pull more top earners into the 45p tax bracket.


The Autumn Statement reduces the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes from 6 April 2023.


The Income Tax additional rate threshold (ART) will be lowered from £150,000 to £125,140 from 6‌‌‌ ‌‌April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The ART for savings and dividend income will apply UK-wide.


The Chancellor committed to keeping basic and higher rate income tax rates at current levels but extended the threshold freeze to 2028.


This means that the threshold for 20% base rate taxpayers will remain at £12,570 while higher rate 40% taxpayers will start paying at £50,270, frozen for two years longer than originally planned.


The current tax thresholds may push non-taxpayers into the basic rate tax bracket, including some two million more pensioners who will benefit from the state pension triple lock increase this year.


The married couples’ and blind person’s allowances will be uprated with inflation at 10.1%. For 2023/24 married couples’ allowance will be between £4,010 and £10,375 and the blind person’s allowance will rise to £2,870.


National Insurance Contributions (NIC)


Another subject of interest for payroll professionals was NIC, particularly given the amount of changes seen to both thresholds and rates in tax year 2022/23. In the statement, it was confirmed that NIC thresholds will be maintained at current levels for two years longer than previously planned. This means they will stay in place until April 2028, and not just until April 2026.


So, the primary threshold (PT) and the upper earnings limit (UEL) will now be maintained until April 2028. The freeport upper secondary threshold (FUST) will remain at £25,000 for the same period. The upper secondary threshold (UST), apprentices upper secondary threshold (AUST) and veteran upper secondary threshold (VUST) will also stay fixed, in alignment with the UEL.


The secondary threshold (ST), payable by employers will be fixed at £9,100 until April 2028. In addition to this, the employment allowance will remain at £5,000. Essentially, there are no planned changes to NIC and NIC reliefs for now.


The Chancellor announced plans to freeze the employer National Insurance threshold until 2028.


The National Insurance secondary threshold will remain at £9,100 until April 2028. However, the government confirmed that 40% of businesses will not be affected as they will be able to offset the freeze by using the £5,000 employment allowance. This effectively removes the requirement to pay employer NICs, so the measure will primarily affect the largest employers.


Dividends


From April 2023, the dividend tax allowance will be halved to £1,000 from the current £2,000 with a further cut to follow.


The dividend allowance will be halved to £500 from April 2024.


Introduced in April 2016, the dividend allowance was initially £5,000 but reduced to £2,000 from April 2018, so reducing this further will erode the value of the allowance over time.


Taxpayers with dividend income have also been impacted by the change to dividend tax rates from April 2022, which increased by 1.25% to deter taxpayers from using dividends to avoid the increased National Insurance rates and anticipated Health and Social Care Levy. Although this was abolished for employers and employees, the rise remains in place for dividends.


The Government has confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows:


· The dividend ordinary rate – 8.75%

· The dividend higher rate – 33.75%

· The dividend additional rate – 39.35%


Capital Gains Tax (CGT)


The Capital Gains Tax Annual Exempt Amount will reduce from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. The government will legislate for this measure in Autumn Finance Bill 2022.


It punishes, for example, the smallest shareholders (those who literally buy and sell very small shareholdings each year) and will also increase the pressure on HMRC, in that more people will now be required to complete a tax return annually.


This will increase the CGT liabilities of affected individuals by up to £1,764 and £2,604 in 2023/24 and 2024/25, respectively.


Inheritance Tax (IHT)


The Inheritance Tax nil-rate band and residence nil-rate bands will be fixed at their current rates until April 2028.


VAT


The VAT registration and deregistration thresholds will be maintained at the current levels of £85,000 for an additional two years from 1‌‌‌ ‌‌April 2024.


National living wage (NLW) and benefits increase


The Chancellor has announced an increase in the national minimum wage for those aged 23 and over to £10.42.


From April 2023, those on minimum wage aged 23 and over will see an increase by 9.7% from £9.50 to 10.42 an hour.


This represents an increase of over £1,600 to the annual earnings of a full-time worker and is expected to benefit over 2 million low paid workers.


The national living wage rates will increase by 10.9% for those aged 21-22 years old to £10.18 an hour, 9.7% for 18-20 year old to £7.49 an hour, and 9.7% for 16-17 year old to £5.28.


Pensions


Prior to the Autumn Statement, there was much discussion about what would happen with pensions, and doubt cast over the future of the triple lock commitment. The triple lock means that state pensions will increase by whatever’s highest of average earnings growth, inflation or 2.5%. In April 2022, the triple lock was temporarily replaced by a double lock, meaning the state pension increased by the highest of inflation or 2.5%. This was because average earnings growth was significantly skewed due to the impact of the coronavirus job retention scheme. The full basic state pension will see an increase from £141.85 to £156.20 and the new state pension will increase from £185.15 to £203.85.


It's been confirmed that the triple lock will be honoured for April 2023, and subsequently, the state pension will increase by 10.1%, in line with September 2022’s rate of inflation.


A review of the state pension age is currently underway, which is assessing whether the current timetable for increasing the age over the next 25 years is still suitable. The secretary of state for work and pensions will publish the results of this review in early 2023.


Further support for pensioner households will be provided in the form of an additional £300 cost-of-living payment and information on the eligibility criteria for, and timing of the payments, will be provided at a later date. Additionally, pension credit will increase in line with inflation, as opposed to in alignment with average earnings growth, from April 2023.


Company car


The company car tax rates for electric vehicles will also be rising, however this will be limited to 1 percentage point per year for three years from 2025. This will keep rates for electric vehicles low, but now provides some ability for companies to prepare for the future with company car plans. This will set the maximum appropriate rate at 5% for electric cars and 21% for ultra-low emissions cars. With leasing contracts spanning multiple years, this ability is important for the long-term strategies in reducing emissions and achieving net zero.


To continue to incentivise investment in charging infrastructure, the Spring Finance Bill 2023 will extend the first-year allowance on electric vehicle charge points. This 100% relief will be extended until 31 March 2025 for corporation tax and 5 April 2025 for income tax.


Rates for all other vehicle bands will increase by 1 percentage point for 2025/26 up to a maximum of 37%, and will then be fixed in 2026/27 and 2027/28. From 6 April 2023, the car and van fuel benefit charges and van benefit charges will be increased in line with inflation. Legislation to regulate this will be delivered in December 2022.


The government plans is to tax electric vehicles from April 2025 to equalise the road vehicle excise duty with petrol and diesel vehicles.


From April 2025, electric cars, vans and motorcycles will have to pay road tax in the same way as petrol and diesel vehicles.


This means:


· new zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year;


· zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate;


· the expensive car supplement exemption for electric vehicles is due to end in 2025. New zero emission cars registered on or after 1 April 2025 will therefore be liable for the expensive car supplement. The expensive car supplement currently applies to cars with a list price exceeding £40,000 for five years;


· zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year;


· zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans;


· zero emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year;


· rates for alternative fuel vehicles and hybrids will also be equalised.


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 kilometer will increase by 1% 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.


Corporation Tax changes


  • reforms to R&D tax reliefs – for expenditure on or after 1‌‌‌ ‌‌April 2023, the Research & Development Expenditure Credit rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. The government is continuing the review of R&D tax reliefs that was launched at Budget 2021 and will consult on the design of a single scheme.

  • reforming the audio-visual creative reliefs – the government has launched a consultation on a series of proposals that will go further to incentivise and support the growth of the audio-visual sectors, ensuring these highly skilled industries continue to thrive in the UK.

Stamp Duty Land Tax (SDLT)


SDLT cuts – on 23‌‌‌ ‌‌September 2022, the government increased the nil-rate thresholds of SDLT from £125k to £250k for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold for first time buyers from £300k to £425k. The cut will remain in place until 31‌‌‌ ‌‌March 2025. This will be legislated through the SDLT (Reduction) Bill


Other items of interest


Additional Compliance Resource for HMRC


Over the next five years, the government has pledged to invest £79 million to allow HMRC to engage additional staff to investigate and tackle cases of tax fraud, and address compliance risks with the highest taxpayers.


Review of the Energy Price Guarantee (EPG)


The EPG was introduced in October 2022 which capped the average energy bill at £2,500 until 31 March 2023. From April 2023, the government will increase the EPG to £3,000 per annum up to April 2024, saving £14 billion of government spending. Equivalent support will continue to be provided in Northern Ireland.


Protecting vital public services


The Chancellor confirmed the government recognises the NHS is under significant pressure, including the ongoing recovery from the impact of the pandemic. The statement pledged to commit to an £8 billion package for the health and social care system. He confirmed the Barnett formula will allow an additional £1.5 billion for Scotland, £1.2 billion for Wales and £650 million for Northern Ireland to go towards funding the NHS and schools in these devolved administrations.


Cost of living payment


The government promised to provide the most vulnerable with additional cost of living payments for 2023-24. For householders on means-tested benefits, they will receive an additional £900, pensioner households will receive an additional £300, and individuals on disability benefits will receive an additional £150 disability cost of living payment. These payments will be made on a UK-wide basis.


Investment Zones programme


The Chancellor announced that he has changed the approach to investment zones to help build clusters for new growth industries. He confirmed “the Levelling Up Secretary will work with Mayors, Devolved Administrations and local partners to achieve that with the first decisions announced ahead of the Spring budget”.


Disclaimer: Whilst we take care to ensure the accuracy of this document, no responsibility for loss incurred by any person acting or refraining from action as a result of this information can be accepted by the authors or firm.

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