On 17 November 2022, in the face of significant economic challenges for the UK and global economy, the Chancellor of the Exchequer Rt Hon Jeremy Hunt MP delivered his Autumn Statement 2022 setting out stability, growth and public services as his priorities. To achieve this aim, the Government has reversed nearly all the measures in the Growth Plan 2022 and this Autumn Statement outlined instead £25bn of tax hikes and £30bn of spending cuts.

We set out below a summary of the main tax announcements but in the meantime please speak to your usual Statura contact should you wish to discuss the content of this document in more detail or indeed the way in which the Autumn Statements 2022 might affect your personal circumstances.

PERSONAL AND EMPLOYMENT TAXES

Tax rates and allowances

The additional rate threshold (ART), above which individuals pay income tax at 45%, will be lowered from £150,000 to £125,140 from 6 April 2023.

The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024. Dividends received above this level will be subject to the higher dividend rates (currently at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers).

The government will also reduce the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. This, combined with the reduction in dividend allowance, will mean that a larger amount of investment income and gains will become subject to tax.

Additionally, the income tax personal allowance (£12,570) and the income tax higher rate threshold (£50,270), will be frozen at their current levels until April 2028.

National Insurance Contributions rates and thresholds

The national insurance contributions (NIC) thresholds (various) will be frozen at their current levels until April 2028.

The government will fix the level at which employers start to pay Class 1 Secondary NICs for their employees (the Secondary Threshold) at £9,100 from April 2023 until April 2028.

As previously announced, the Employment Allowance will be retained at a level of £5,000 per annum until 31 March 2026.

Corporation Tax rates

As previously announced, the planned increase in the Corporation Tax rate to 25% for companies with profits in excess of £250,000 will go ahead from 1 April 2023, with the rate increasing incrementally from 19% to 25% for companies with profits of between £50,000 and £250,000.

Following the decision to proceed with the Corporation Tax rate increase to 25%, the changes to the Bank Corporation Tax Surcharge will also go ahead from April 2023. This means that from April 2023, banks will be charged an additional 3% rate on their profits above £100.

From April 2023, the rate of Diverted Profits Tax (DPT) will increase from 25% to 31%, in order to retain a 6 percentage points differential above the main rate of Corporation Tax, and therefore ensure that it remains an effective deterrent against diverting profits out of the UK.

Business rates

From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package worth a total of £13.6bn, including relief for retail, hospitality and leisure industries, will however ensure that business rate increases from 1 April 2023 will have a reduced impact on businesses.

Capital allowances

Capital allowances allow businesses to write-off their costs of qualifying capital investments against their taxable profits over time. 

The £1m threshold been made the permanent level of Annual Investment Allowance (AIA), which allows a 100% deduction for qualifying plant and machinery expenditure up to that limit.

The 130% super deduction announced in March 2021 will end in April 2023 as planned and has not been extended.

The 100% capital allowances for expenditure incurred on charging points for electric vehicles, will be extended to 31 March 2025. This was originally planned to end in April 2023.

Reforms to Research and Development (R&D) tax reliefs

For expenditure on or after 1 April 2023, the deduction rate for qualifying expenditure under the small and medium-sized enterprises (SME) scheme will be cut from 130% to 85%.  The cash repayment credit under the SME scheme will also be reduced from 14.5% to 10%.

However, the credit amount available under the large company R&D expenditure credit scheme will be increased from 13% to 20%.

Transfer pricing documentation

From April 2023, large multinational businesses operating in the UK will be required to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD’s Transfer Pricing Guidelines (Master File and Local File). This will give businesses certainty on the appropriate documentation they need to keep and enable HM Revenue and Customs to effectively identify risks and conduct transfer pricing investigations more efficiently.

Tackling Avoidance

Following consultation, the government will legislate to implement the globally agreed G20-OECD Inclusive Framework Pillar 2 framework in the UK. For accounting periods beginning on or after 31 December 2023 the government will:

•                 Introduce an Income Inclusion Rule (IIR) which will require large UK headquartered multinational groups to pay a top-up tax where their foreign operations have an effective tax rate of less than 15%

•                 Introduce a supplementary Qualified Domestic Minimum Top-up (QDMTT) tax rule which will require large groups, including those operating exclusively in the UK, to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.

Both the IIR and QDMTT will incorporate the substance-based income exclusion that formed part of the G20-OECD agreement. This will be legislated for in Spring Finance Bill 2023.

Alongside the implementation of the Pillar 2 rules, the government is investing a further £79m over the next five years to enable HMRC to allocate more staff to tackling cases of serious tax fraud and address tax compliance risks.

VAT AND INDIRECT TAXES

The VAT registration and deregistration thresholds will not change for a further period of 2 years from 1 April 2024. At £85,000, the UK’s VAT registration threshold is more than twice as high as the EU and OECD averages.

STAMP DUTY AND STAMP DUTY LAND TAX

The previously announced Stamp Duty Land Tax (SDLT) increases to nil-rate thresholds will now be temporary and will remain in place until 31 March 2025.

Preventing Capital Gains Tax avoidance

The government will legislate in Spring Finance Bill 2023 so that shares and securities in a non-UK company acquired in exchange for securities in a UK “close” company will be deemed to be located in the UK. This will have effect where the share exchange is carried out on or after 17 November 2022.

In particular, these rules will apply to non-domiciled individuals who exchange securities in a personal UK incorporated company for securities in a non-UK incorporated company under the (tax neutral) share for share exchange provisions. This aims to prevent them from benefiting from beneficial income tax and CGT treatment following the exchange. The rules apply to individuals who have a holding of at least 5% in the UK “close” company and where the non-UK company would be a “close” company if it were a UK company.

Energy windfall taxes

From 1 January 2023, the Energy Profits Levy (EPL) rate will rise by 10 percentage points to 35%. The investment allowance will be reduced to 29% for all investment expenditure (other than decarbonisation expenditure).

The government is introducing the Electricity Generator Levy, a temporary 45% tax that will be levied on extraordinary returns from low-carbon UK electricity generation. The tax will apply to extraordinary returns arising from 1 January 2023 and will be legislated for in Spring Finance Bill 2023.

Online Sales Tax

Following consultation, the government has decided not to introduce an Online Sales Tax (OST). The government’s decision reflects concerns raised about an OST’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models.