The 2022 Autumn Statement
Kwasi Karteng’s budget received an unfavourable response from the markets and he ultimately paid the price. As a result, the 2022 Autumn Statement from the replacement chancellor is a complete U turn. It has implemented drastic changes, which will prove to be highly unpopular amongst the business community and the electorate as a whole.
This budget was presided over by a PM largely responsible for causing the national debt to reach astronomical levels due to his actions whilst chancellor. This occurred before the impact of current global factors and current ballooning inflation.
We found it particularly ironic that the 2022 Autumn Statement included phrases such as 'sustainable public finances' and 'taking responsible decisions'. Some might say that this approach to the stewardship of the UK economy has been noticeably absent these last few years.
It should come as a no surprise that the British taxpayer will be expected to suffer the fiscal pain from these policies for many years to come.
Regrettably many business owners will find little comfort in the 2022 Autumn Statement and it will be case of mitigating the impact of the chancellor's tax rises wherever possible.
The 2022 Autumn Statement - income tax and NIC
Rather than increase the tax rates, which presumably would break the government's manifesto pledge, they opted to raise taxation by stealth. In practice this means either freezing or reducing those tax allowances within the existing tax legislative framework.
The additional rate income tax threshold has now been reduced from £150,000 to £125,140 with effect from 6 April 2023. Given that the effective rate of tax on income between £100,000 and £125,000 per annum is 60%, there will be added emphasis on tax planning for high earners going forward .
The personal allowance of £12,570 will remain at it's existing level until April 2028. However the married couples allowance rises to a minimum of £4,010 and a maximum of £10,375 from 6 April 2023.
The annual dividend allowance will be reduced from £2,000 to £1,000 at the start of the 2023/24 tax year. There will be a further reduction in this to £500 from 6 April 2024.
The dividend tax rate increases to 8.75%, 33.75% and 39.35% introduced from 6 April 2022 will remain in place.
As the rate of tax applied to overdrawn director's loans is linked to the existing higher rate of tax on dividends it will require an even more careful balancing act for company director shareholders who will be keen to keep their director's loans in check whilst avoiding any unnecessary tax liabilities.
Class 2 and Class 3 NIC rates will increase to £3.45 per week and £17.45 per week respectively from 6 April 2023.
The employee NI threshold of £9,100 and employers NI allowance of £4,000 will remain unchanged until 6 April 2028.
The 2022 Autumn Statement - Corporation tax
Corporation tax rates
The new chancellor has effectively reinstated the increased rate of Corporation Tax from 19% to 25% from April 2023 for companies whose taxable profits are more than £250,000. Wherever you consider this to be a 'fairer' system of company taxation if you are small business owner, as opposed to a multi-national, might be open to debate.
R&D tax reliefs
The existing schemes for R&D tax reliefs have been revamped from April 2023 in an attempt to ensure greater compliance, focus on abuse and rebalance the relief. These changes are as follows:
Apparently these changes have been designed to simplify the current system. However it does appear on the surface of it, that if you are a small/medium sized start-up business you will potentially be worse off as a result of these changes.
The 2022 Autumn Statement - VAT
There is no change to the VAT Registration and Deregistration thresholds for a further period of 2 years from 1 April 2023.
The 2022 Autumn Statement - company vehicles
From April 2025 electric cars, vans and motorcycles will now pay Vehicle Excise Duty like their diesel and petrol counterparts.
The appropriate percentages for electric and ultra-low emission cars (used to calculate the taxable benefit) will increase by 1% annually from 2025-26 to 2027-28 to a maximum of 5% for electric cars and 21% for ultra-low emission cars.
These changes make frustrating reading for those owners of electric company vehicles. Given the government's apparent 'green' agenda, hopefully there will be increased expenditure on the UK's electric charging infrastructure in line with these changes.
In the meantime, it has been confirmed that the 100% First Year Allowance for electric vehicle charge points will be extended until April 2025, should you wish to instal one yourself.
Rates for all other vehicles bands will be increased by 1% per annum to a maximum of 37% and will then be fixed in 2026-27 and 2027-28
The Car and Van Fuel Benefit Charges and van benefit charges will increase in line with CPI from 6 April 2023.
The 2022 Autumn Statement - capital gains tax
From April 2023, the CGT Annual Exemption is reduced from £12,300 to £6,000. This will then decrease to £3,000 from April 2024. The chancellor has intimated that there might be further changes - a possible alignment with income tax rates. So for example if you are currently trading in cryptocurrency or NFT's personally, now might be the time to consider an alternative approach - perhaps operating via a limited company?
It's difficult to find many positives from this budget (or the chancellor), though perhaps now more than ever it's time to think about tax mitigation strategies. It will be interesting to see how the government manage to salvage a potential vote killing budget before the next General Election!
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