A lot can change in a short space of time, with the mini-Budget delivered less than two months ago promising wide ranging tax cuts for all feeling like a distant memory. Now, in Jeremy Hunt’s first Autumn Statement, he has not only reversed the tax cuts previously promised, but has gone the other way and raised taxes, as he indicated he would have to do, to achieve his aims of ‘stability, growth and public services’.
SoGlos spoke to Nick Haines, a partner at Gloucestershire accountants and business experts Hazlewoods, to get 10 of the key takeaways from the Autumn Statement 2022 - and what they mean for businesses in the county.
Tax threshold reduced for additional rate taxpayers
Additional rate taxpayers - who had previously thought they were going to pay a maximum of 40 per cent tax - will now be paying 45 per cent and earlier than previous expected, with the additional rate band decreasing from £150,000 to £125,140, and those earning above £150,000 paying an additional £1,230 in tax each year.
Freeze on income tax allowances and bands
Other than additional rate taxpayers, all other individuals will see a freeze in their allowances and bands until 2028. These had already been announced as being frozen until 2026, but a further two years will see the bands remain the same for seven consecutive years. Given wage inflation is currently running at over five per cent, this policy will bring more taxpayers into paying a higher rate of tax, despite their wages struggling to keep up with inflation.
Employer’s national insurance threshold frozen
Another band frozen is the employer national insurance threshold of £9,100, again until 2028. This is expected to generate up to £5.8 billion by 2027/28, and is a further tax cost on businesses, along with the previously announced increase in corporation tax to 25 per cent for companies.
Capital gains tax annual exemption reduced
There had been fears that the rate of capital gains tax would be increased, but instead the Chancellor announced a reduction in the annual exemption from the current £12,300 to £6,000 in 2023/24 and then £3,000 in 2024/25. This is only expected to bring in an additional £440 million each year, when fully implemented, so barely touches the sides of the £55 billion the government needed to find.
Dividend allowance cut
Another allowance and another cut, with the dividend allowance, which was £5,000 when first introduced and is currently £2,000, now to be decreased to £1,000 in 2023/24 and £500 in 2024/25. This is anticipated to generate up to £940 million each year by 2027/28.
Windfall tax on energy providers
The biggest single revenue raiser was a windfall tax on energy providers, increasing it to 35 per cent until 2028 with a 45 per cent rate for electricity generators. At its peak, this is estimated to raise £7 billion per year.
Research and development relief
In an unexpected move, the Chancellor has rebalanced the reliefs available for research and development, with a reduction in relief for small and medium sized business and an increase for larger businesses. Unsurprisingly, that rebalancing sees the Exchequer taking its share, with it generating up to £1.3 billion per year by 2027/28.
Electric vehicles no longer exempt from vehicle excise duty
Despite the renewed pledge to reduce UK carbon emissions by 68 per cent by 2030, electric cars will no longer be exempt from vehicle excise duty in 2025/26.
The tax charge for employees with electric company cars has been at historically low rates in recent years but is also set to rise from April 2025. An employee is currently subject to tax on the benefit based on two per cent of the list price of the electric car, but this will increase to five per cent by 2027/28.
Stamp duty land tax band changes
For homebuyers, no immediate changes were made to stamp duty land tax, but the higher nil rate band of £250,000 will revert back to £125,000 after 31 March 2025. Similarly, the higher nil rate band of £425,000 for first-time buyers will also end on the same date, returning to £300,000.
Cost of living crisis support
On spending, the NHS and schools were protected, but other departments will need to tighten their belts. A range of support packages for the most vulnerable was announced to provide support during the cost of living crisis, whilst the energy price guarantee was extended until 31 March 2024, albeit at a higher rate of £3,000.
Those on lower wages received positive news that the national living wage is rising by 9.7 per cent to £10.42 per hour, whilst pensioners will be raising a glass to the Chancellor as he confirmed the commitment to the triple lock, ensuring state pensions will rise in line with inflation from April 2023.
Only time will tell if the tax measures announced have the desired effect on inflation, economic growth and the UK’s debt levels. If not, this may just be the beginning.