Initor Global guide to the Chancellor’s 2022 Autumn Statement

The Chancellor of the Exchequer (Jeremy Hunt) delivered his Autumn Statement on 17 November 2022 against a backdrop of a cost of living crisis and high inflation for the UK. The statement followed a period of significant change for the UK government, with tax and spending changes previously announced resulting in serious turmoil for the UK financial markets. In the lead-up to the statement, the government had already announced many of the changes introduced by the previous Chancellor on 23 September 2022 were being reversed.

This blog highlights the key announcements made in the Autumn Statement as they affect businesses and individuals, with a particular focus on information accountants may need in advance of the new tax year on 6 April 2023. It is not a complete guide to the Autumn Statement. If you require the full text of the Chancellor’s Statement and supporting documents, please check the GOV.UK website.

Income Tax Rates and Thresholds from 6 April 2023 (2023/24 tax year)

The Chancellor confirmed for the 2023/24 tax year the following income tax rates will apply: 

• the basic rate of income tax will remain at 20%
• the higher rate of tax will remain at 40%
• the additional rate of income tax will remain at 45%.

The previously announced reduction in the basic rate of income tax has been postponed indefinitely.

The Chancellor confirmed for the 2023/24 tax year the following thresholds where individuals start paying tax will apply:

• the tax-free threshold (the personal allowance) remains at £12,570
• the basic tax rate threshold remains at £50,270
• the additional rate threshold is reduced to £125,140 (from £150,000).

The government confirmed all thresholds will be frozen for six years (to April 2028).

The impact on taxpayers in England, Wales, and Northern Ireland is shown in the table below.

Income over £100,000 – reduction in tax free amount

For anyone earning over £100,000 per annum, the tax-free amount (personal allowance) is reduced by £1 for every £2 you earn above £100,000. This means the allowance is zero when you earn £125,140.

Welsh Government

The Welsh government has some powers in relation to income tax rates and thresholds. The Welsh government decided to follow the rates announced by the Chancellor in his Autumn Statement.

Scottish Income Tax Rates and Thresholds  – updated on 15 December 2022

The Scottish government operates an income tax regime which means anyone resident in Scotland pays different income tax rates, using different bands and thresholds compared to the rest of the UK. The Scottish government announced changes to these rates for residents in its budget on 15 December 2022. The changes mean higher income taxpayers in Scotland will pay more than the rest of the UK. The new rates from April 2023 are shown below. The Scottish government reviews rates and thresholds every year.

As for the rest of the UK, those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

National Insurance Rates and Thresholds

Over the past 12 months, the government has made several announcements surrounding the rates of National Insurance to be paid by individuals. The temporary 1.25% increase from 6 April 2022 in national insurance rates was abandoned from 6 November 2022. The Health and Social Care Levy is no longer going ahead. The introduction of a separate Health and Social Care Levy tax in April 2023 has also been cancelled.

The following paragraphs contain some of the headline rates for accountants, for a full list of national insurance rates and thresholds, please check the GOV.UK website.

Employers and employees national insurance

The Chancellor confirmed National Insurance Contribution (NICs) rates and thresholds will remain at their current levels until April 2028. The thresholds for the main NIC rates are as follows for employers and employees:

Self-employed national insurance

Self-employed individuals pay Class 2 and Class 4 NICs depending on their profits. No NICs are paid if the profit reported is less than £6,725. Where a business reports profit above £6,725 per annum (known as the Small Profits Threshold), Class 2 NICs of £3.45 per week must be paid by the individual (increased from £3.15 per week).

From April 2023, where a business reports a profit above £12,570 per annum (known as the Lower Profits Limit), Class 4 NICs must be paid. The relevant limits and NIC rates are shown in the table below.

Dividend Tax and allowance

The Chancellor announced the tax free dividend allowance amount is reduced from the current level of £2,000, to £1,000 from April 2023 and then £500 from April 2024.

The amount of tax to pay on dividends above the dividend allowance depends on your Income Tax band. The Chancellor has not changed the rate of tax to be paid which is as follows:

Tax on savings

No changes were announced to the threshold for paying tax on savings interest which remains at £5,000. The personal savings allowance for basic rate taxpayers remains at £1,000 and for higher rate taxpayers the amount remains at £500.

Tax Free Individual Savings Accounts (ISAs)

The maximum amount an individual can invest in an Individual Savings Accounts ((ISA) remains unchanged at £20,000 per annum.

National Living Wage

From 1 April 2023, the government will increase the National Living Wage by 9.7% to £10.42 an hour, for those aged 23 and over.

Off-payroll working rules (IR35)

No changes have been made to the off-payroll working rules. The announcement made by the previous Chancellor on 23 September 2022 was reversed. The IR35 reforms introduced by the government in 2017 and 2021 will continue to apply. This means medium and large sized businesses who engage a contractor working through an intermediary (such as a personal service company) are responsible for determining the IR35 status of the engagement.

Value Added Tax

No changes were announced to the rates of VAT individuals pay or the registration level for businesses, which remains at £85,000 until 2026.

Capital Gains Tax

The Chancellor announced the annual exempt amount from Capital Gains would be reduced from the current level of £12,300, to £6,000 from April 2023, then £3,000 from April 2024.

Vehicle Excise Duty applies to electric vehicles from April 2025

From April 2025 electric cars, vans and motorcycles are no longer exempt and will need to pay Vehicle Excise Duty in the same way as other vehicles. The rates to be published in the Finance Bill will provide that 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 of £165 per year. 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 5 years.

Company Car Tax

The Chancellor announced tax rates on company cars will be fixed from 6 April 2025 to 5 April 2028.

Percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1% from April 2025, a further 1% in from April 2026, and a further 1% in from April 2027, up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars.

Rates for all other vehicle bands will be increased by 1% from April 2025 up to a maximum appropriate percentage of 37% and will then be fixed from April 2026.

Inheritance Tax

No changes were announced to the inheritance tax (IHT) threshold. The ‘nil-rate band’ – the amount that can be passed on before IHT is due at a rate of 40% – will stay at its current rate of £325,000 until April 2028.

Stamp Duty Land Tax (England and Northern Ireland only)

The Chancellor announced the changes announced by the previous Chancellor on 23 September would now be on a temporary basis.

The increase in the nil-rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000. The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000.

The SDLT reduction is temporary and will remain in place until 31 March 2025.

Corporation Tax

The Chancellor confirmed the increase in the Corporation Tax rate to 25% for companies with profits over £250,000 will go ahead. The Small Profit Rate of 19% will be paid by companies with profits less than £50,000. The corporation tax rate to be paid on profits between £50,000 and £250,000 will be tapered up to 25% using marginal relief calculations.

Research and Development Tax Relief (‘R&D’ tax relief)

The government is reforming the way tax relief is provided for Research and Development expenditure by businesses. For expenditure on or after 1 April 2023:

• the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%
• the SME credit rate will decrease from 14.5% to 10% and
• R&D expenditure credit rises from 13% to 20%.

Annual Investment Allowance

The Chancellor announced the Annual Investment Allowance will remain at the permanent level of £1 million from 1 April 2023.

Help for energy costs

The Energy Price Guarantee provides support for household and business energy bills until 31 March 2023. Support for households will continue from April 2023 though support will be less generous and based on a higher average usage price cap of £3,000 (up from £2,500) per annum, with additional targeted support for vulnerable households.