Autumn Statement 2022 – National insurance contributions

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the government has:

• reversed the temporary increase in NICs and
• cancelled the Health and Social Care Levy completely.

According to the government, not proceeding with the Levy will reduce tax for 920,000 businesses by nearly £10,000 on average next year.For SMEs, the government predicts that the savings will be around £4,200 on average for small businesses and £21,700 for medium sized firms from 2023/24.In addition, it will help almost 28 million people across the UK save £330 on average in 2023/24, with an additional saving of around £135 on average this year.

More detail for employees and employers

The changes took effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

The government hopes that most employees will receive the NICs reduction directly via the payroll in their November pay but acknowledges that some will have to wait until December or January, depending on the complexity of their employer’s payroll software.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

NICs thresholds

A similar principle to that outlined above for income tax thresholds will be followed in respect of the NICs upper earnings limit and upper profits limit. From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023 until April 2028. The Class 2 lower profits threshold will also be fixed from April 2023 until April 2028 to align with the lower profits limit. They will again be £12,570 and £50,270 as appropriate.

In addition, the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels in 2023/24, namely £6,396 and £6,725 per annum respectively.

The government will uprate the Class 2 and Class 3 NICs rates for 2023/24 to £3.45 per week and £17.45 respectively.

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

The government states: ‘It is fair that businesses play their part in reducing the UK’s debt. The Employment Allowance means that 40% of businesses do not pay NICs and will be unaffected by this change, and the largest employers contribute the most.’

Autumn Statement 2022 – Capital gains

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.

Combined with the changes to the Dividend Allowance, these measures will raise over £1.2 billion a year from April 2025.

Autumn Statement 2022 – Stamp duty land tax

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

A number of changes were made to the Stamp Duty Land Tax (SDLT) regime earlier this year and these remain. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Higher rates may be payable where further residential properties are acquired.  

However, the government has now confirmed that these changes will be a temporary SDLT reduction. The SDLT cut will remain in place until 31 March 2025 to support the housing market.

Autumn Statement 2022 – Land transaction tax

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The Welsh government also altered its rates in relation to land and buildings in Wales for transactions with an effective date on or after 10 October 2022.

Higher rates may be payable where further residential properties are acquired.

Autumn Statement 2022 – Business

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

Corporation tax rates

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25% would not go ahead. However the government announced on 14 October 2022 that this increase will now proceed and this has been confirmed.

This means that, from April 2023, the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

In addition:

• bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional 3% rate on their profits above £100 million and
• from April 2023 the rate of diverted profits tax will increase from 25% to 31%.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

Companies incurring expenditure on plant and machinery should carefully consider the timing of their acquisitions to optimise their cashflow.

The government will also extend the 100% first year allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.

Research and Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%.

This government states that ‘this reform ensures that taxpayer support is as effective as possible, improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all’. The government will consult on the design of a single scheme and consider whether further support is necessary for R&D intensive SMEs. As previously announced at Autumn Budget 2021, the R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targeting abuse and improving compliance.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

Autumn Statement 2022 – VAT

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

According to the government, at £85,000, the UK’s VAT registration threshold is more than twice as high as the EU and OECD averages.

Autumn Statement 2022 – Vehicles

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The government will set the rates for the taxation of company car benefits until April 2028 to provide long term certainty for taxpayers and industry. Rates will continue to incentivise the take up of electric vehicles.

In addition, from 6 April 2023 car and van fuel benefits and the van benefit charge will increase in line with inflation.

In addition, from April 2025 electric cars, vans and motorcycles will begin to pay Vehicle Excise Duty in the same way as petrol and diesel vehicles. According to the government, this will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate.

Autumn Statement 2022 – Welfare, work and pensions

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

Cost of living payments

The government will provide households on means-tested benefits with an additional £900 cost of living payment in 2023/24. Pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150.

Uprating of benefits

The government will increase benefits in line with inflation, including the state pension. The standard minimum income guarantee in pension credit will also increase in line with inflation from April 2023.

Around 19 million families will see their benefit payments increase from April 2023.

Raising the benefit cap

The benefit cap will be raised in line with inflation, so that more households will see their payments increase as a result of uprating from April 2023. The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London. For single adults it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.

National Living Wage and National Minimum Wage uprating

The government will increase the National Living Wage (NLW) and National Minimum Wage from 1 April 2023 as follows:

• the rate for 23 year olds and over to £10.42 an hour
• the rate for 21-22 year olds to £10.18 an hour
• the rate for 18-20 year olds to £7.49 an hour
• the rate for 16-17 year olds to £5.28 an hour and
• the apprentice rate to £5.28 an hour.

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

In-work conditionality for Universal Credit claimants

The government will bring forward the nationwide rollout of the In-Work Progression Offer, starting with a phased rollout from September 2023, to support individuals on Universal Credit (UC) and in work to increase their earnings and move off benefits entirely. This will mean that over 600,000 claimants on UC whose household income is typically between the equivalent of 15 and 35 hours a week at the NLW will be required to meet with a dedicated work coach in a Jobcentre Plus to increase their hours or earnings.

Autumn Statement 2022 – Energy

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35% and extended to the end of March 2028 and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.

The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.

The government is also setting a national ambition to reduce energy consumption by 15% by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand.

Autumn Statement 2022 – Income tax

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

On 17 November 2022, the government undertook the third fiscal statement in as many months, against a backdrop of rising inflation and economic recession. The Chancellor laid out three core priorities of stability, growth and public services. The government sought a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This was to be accelerated so that it took effect from April 2023. However, whilst the government aims to proceed with the cut in due course, this will only take place when economic conditions allow and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely.

At the Mini Budget on 23 September 2022 the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Income tax allowances

The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

Dividends

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

• the dividend ordinary rate – 8.75%
• the dividend upper rate – 33.75%
• the dividend additional rate – 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.

These changes will apply to the whole of the UK.

Autumn Statement 2022 – Inheritance tax

Budget Summary

• Income tax
• National insurance contributions
• Capital gains
• Inheritance tax
• Stamp duty land tax
• Land transaction tax
• Business
• VAT
• Vehicles
• Welfare, work and pensions
• Energy

The inheritance tax nil-rate bands are already set at current levels until April 2026 and will stay fixed at these levels for a further two years until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000 and the residence nil-rate band taper will continue to start at £2 million.

The Plastic Packaging Tax – what you need to know

The Plastic Packaging Tax came into effect in April this year, and if your business deals with any kind of plastic packaging in relation to your products, you may need to be registered for this.

Anyone importing or manufacturing more than 10 tonnes of plastic packaging each year to the UK will be subject to this tax. Those businesses below this threshold are exempt, but if you breach this threshold, there are a number of things you need to know. For example, if the plastic you manufacture or import has at least 30% of recycled plastic by weight, you will also be exempt from this tax. The tax is designed to encourage manufacturers both here and abroad to use more recycled plastic in their processes.

When do I need to notify HMRC?

If your business has imported or produced more than 10 tonnes of plastic since April 1 this year, you need to register within 30 days of breaching this limit. If you have already missed this deadline, then get in touch with your accountant or HMRC as soon as possible. Around 20,000 businesses are estimated to be affected by this, with an additional £400,000 as an annual cost burden on these businesses, mostly for the additional administrative requirements of this tax.

The fee charged is £200 per metric tonne used or manufactured, but what is considered ‘plastic’ is a moot point and there is more information in the HMRC guidance. There are other things to consider too, such as the plastics that qualify are those which are considered single use by the end consumer, or those used in the supply chain. For example, if plastic punnets of strawberries are imported, then the punnets themselves may be subject to this tax.

This is a complex area, so get some help

However, it is a very complex tax, and you will need specialist guidance to navigate it. You can find out more information on Gov.uk, or by speaking to your accountant who can help you.

If you need to register, you can do this online with some exceptions – or again, speak to your accountant and ask him or her to deal with this for you.

We can help you meet your obligations

If you think you need to register for the Plastic Packaging Tax, please get in touch with us and we can help you navigate this incredibly complex area.

How to protect your business in a recession

The UK’s GDP fell by 0.3% in August according to official figures, and if GDP falls for two quarters in a row, that is the definition of a recession. Experts at the EY ITEM Club predict the UK will be in recession for three quarters, which would take us up to the middle of 2023, so businesses need to start thinking about how they can protect themselves before the downturn comes.

Your accountant is the best source of information for you in relation to your business specifically, but here we go through a number of things you can consider doing to protect your business in preparation for the expected recession.

Get your cashflow sorted and deal with any debt

Cashflow is the lifeblood of any business and when there is not enough money coming in on a regular basis, there is no chance of the business surviving in even the most beneficial conditions. But if a recession on the horizon, then focusing on cashflow is essential.

By keeping on top of invoices, chasing payments that are slow to be paid or even using invoice factoring if you need to – where you sell your invoice to a company that will pay you, say, 80-90% of the value of that invoice and they will then chase the debtor for the full payment themselves – you will make sure the business has enough money flowing to pay all necessary overheads.

Where possible, you should also look to reduce the amount of debt you have in the business. Paying interest on loans during a downturn is not a good idea if you can avoid it, as that is a cost that could be removed in advance if conditions are right. Also, if your business has reduced its debts, then when the recession ends and you come out of the other side, your business would be in a better position to access additional borrowing if you need it.

Insulate your business by cutting costs where you can

Preparing for a recession is never going to be easy, but one thing is for sure – your business needs to start looking at where costs can be cut before profits start being hit. This could mean, for example, reducing production costs, limiting overtime payments, or reducing the number of hours staff work. One of the biggest expenses for many businesses are employees and it may be necessary to reduce your overall headcount for the business to survive. This is never an easy decision, especially during a cost-of-living crisis when people are relying on their incomes more than ever. But it should be considered as a last resort, if necessary, especially if you know you have areas within your business that could be leaner.

Laying people off is never comfortable, and it may not be necessary for your business specifically. But if you do need to do this, make the move sooner rather than later. You must ensure you are working within all employment rules and giving people the requisite amount of notice and redundancy payments. If you are not sure how to do this, then speak to a human resources specialist and get advice to make sure you do not fall foul of any rules.

Let us help you

If you need to consider ways to prepare your business for an upcoming recession, please get in touch with us and we can go through the various options with you.

What does the market volatility mean for you?

The market volatility resulting from the ill-fated mini-Budget on September 23 has created real concern for investors. Most of the measures announced that day were reversed just weeks later, but the fallout has left markets in a state of turmoil.

The FTSE 100 was at 7,237.6 on September 21, two days before the mini-Budget. Soon after on September 29, it had dropped to 6,881.6 but it had recovered to more than 7,000 at the time of writing.

This level of volatility within such a short period of time is concerning for anyone, but there are things that can be done if you want to insulate yourself from the ups and downs of the markets.

Drip-feed investments

One of the best ways to even out the peaks and troughs of volatile markets is to invest any money you want to put into the markets over time. Making regular monthly contributions as opposed to a one-off investment allows you to make the most of the dips when the market falls.

Putting money in at different times allows you to spread the risk of your investment because you are not making a single investment when the market may be at its peak. Instead, you are buying no matter what the value of the market is, meaning you get more when it is in a dip, and slightly less for your investment when it is at a peak. When your investments rise in value, the units will rise accordingly, and the relative difference in price will be smoothed out.

Diversify your portfolio

It is also important to diversify your investments to cope with any downturn. Diversification can be done in a variety of ways – by sector such as energy, healthcare and so on; by geographical location as in the UK, US, and Asia; or by theme such as environmental, social and governance (ESG) investing. Or a combination of all of these.

Making sure your portfolio is balanced and diversified is not easy to do alone unless you are an expert, so you would be wise to get professional help to achieve this. It must also be done within your own risk profile, and in a way that meets your short-term and long-term investment goals.

You need to monitor your portfolio’s performance and balance over time. When different areas of your portfolio rise and fall, the balance of that portfolio can become skewed. It should be revisited at least once a year, and more often if there is a change in your circumstances or a major change in an area you are investing in. Remember, this applies to your pension funds too, not just your investment portfolio. You need to consider everything together.

Above all, don’t panic when the markets fall

The worst thing you can do if you see markets fall is panic. Any knee-jerk reactions you make to market falls are likely to result in bad decisions being made. Besides, the very worst thing you can do is sell assets when they have fallen in value. It is far better to stay invested and wait for the recovery to come. The key thing to remember is that while seeing your portfolio value fall on a screen, unless you crystallise that loss by selling, it is merely a paper loss. Bide your time and the markets should recover.

This is where a good accountant can help you. Whether you are investing for your business or personally, the same rule would apply. It can be worrying when you see markets falling, or your investments worth less than they were. But if you have concerns, contact your accountant. He or she will be able to advise you on the best course of action, which in many cases is to do nothing at all.

We can help you

If you have concerns about your portfolio or your current investment mix, speak to us and we will work with you to make any necessary changes to help rebalance your portfolio.

U-turns and changes – what happened to the mini-Budget announcements?

The majority of measures in former Chancellor Kwasi Kwarteng’s mini-Budget have been scrapped after new Chancellor Jeremy Hunt tried to settle markets and politicians across the House of Commons with an Emergency Statement on October 17.

Gone is the controversial plan to remove the 45% top rate of tax, and the basic rate of tax will remain at 20% from April next year. Corporation Tax will also increase to 25% from the current 19% from April next year, an announcement made by now former Prime Minister Liz Truss days before she resigned the top job, to be replaced by Rishi Sunak. In addition, the IR35 and dividend tax cut reforms will not go ahead.

What about the measures to help people with their energy bills?

The planned help with the Energy Price Guarantee – one of the key policies in Liz Truss’s short tenure – will remain in place until April 2023, but after this there will be a Treasury-led review into how best to help businesses and consumers with their bills going forwards.

Energy analysts Cornwall Insight have warned that following the removal of this support, bills could reach as high as £4,347 a year. How the Government plans to support bill payers after this time remains to be seen.

Were any of the benefits kept in place?

Thankfully, some of the mini-Budget announcements that were beneficial were kept in place by Mr Hunt. For example, the Stamp Duty Land Tax changes that came into effect on September 23 mean homebuyers will not pay any Stamp Duty on property purchases up to £250,000, and first-time buyers would not have to pay Stamp Duty on the first £425,000 of the property purchase.

Is the National Insurance rise still being scrapped on November 6?

The mini-Budget announcement to scrap the 1.25% rise in National Insurance from November 6 was another measure that escaped the chop by Mr Hunt, and the Health and Social Care Levy which was due to come into effect from April next year will not be implemented as Mr Hunt continued with the plan outlined by his predecessor.

Warning of pain ahead

However, both Mr Hunt and the new PM Rishi Sunak have been at pains to outline that there are likely to be difficult times ahead. Mr Hunt made this clear in his speech on October 17, when he also referenced Ms Truss’ “mistakes”.

The Chancellor’s Autumn Statement will now take place on November 17, delaying a planned medium-term fiscal statement on October 31 to offer a more comprehensive Autumn Budget. This will also include the Office for Budget Responsibilities’ forecast, a key ingredient that was missing in Mr Kwarteng’s mini-Budget which was part of the reason markets reacted so badly to the apparently unfunded announcements. We will keep you updated at the end of November with any further changes.

Contact us

There is no doubt things are currently changing at pace, so if you want any assistance to keep up with what is going on to protect your own or your business’s finances, please contact us and we will give you all the help, support and information you need.