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Category: Autumn Statement

Big plans for private and State Pensions

Big plans for private and State Pensions

Pensions are set to have one of the biggest overhauls in recent memory, as the Chancellor also announced a consultation on plans that would bring significant changes to pensions in the UK. The biggest change would be a Lifetime Pension, more colloquially known as a ‘pot for life’ – where someone would choose the pension plan that suits them best, and every employer would then pay into that plan rather than the employee being put into the employer’s scheme.

The obvious benefit is that you are less likely to lose this pension, as it will be the only one that you need to have during your working life. The downside, according to experts, is that it will increase the employers’ costs of providing pensions to employees, as they would need to pay into multiple pensions for different members of their workforce. Paying into a single scheme, which is the current system, is much simpler for employers as they have one block payment to make each month. However, these pensions often get forgotten about by employees as they move from job-to-job.

Triple lock stays, with State Pension up 8.5%

There was concern before the Autumn Statement that the triple lock, which uprates State Pensions each year by the highest of average earnings growth, inflation, or 2.5%, might disappear given the high levels of inflation we have seen in recent months in the UK.

However, Jeremy Hunt chose to keep the triple lock, and the State Pension will be increased by 8.5% from April 6, 2024, meaning someone on the new State Pension will see their weekly income rise from £203.85 to £221.20. Anyone who reached State Pension age before 2016 will see their pension rise from £156.20 to £169.50 per week.

This is one of the largest State Pension increases in cash terms and will go some way to helping pensioners who have been struggling with the cost-of-living crisis.

Tax on pensions passed on after death to be scrapped

The Government has also had a change of heart when it comes to pensions passed on after death. The Chancellor announced that pensions passed to beneficiaries if someone dies before they reach age 75 will not be taxed.

The original plan, announced by HMRC in the summer, was to tax any income taken from a pension pot through drawdown – where an income is taken from the underlying fund over a period of time – or from an annuity, would be taxable. This announcement reverses that decision, and HMRC has now confirmed these payments will continue to be tax free from April 6, 2024.

Under the current rules, a defined contribution pension pot can be transferred to beneficiaries tax-free if the original owner of the pension dies before they reach 75.

The Chancellor also re-confirmed that the Lifetime Allowance – which limited the amount of money you could build up in your pension over your lifetime, including all contributions and investment returns to £1,073,100 – will be removed from April 6, 2024.

We can help you meet your obligations

Pensions are complex and whether you are an employer, employee or self-employed, you should know what you can do to maximise your retirement savings. If you would like more information on this, then please get in touch and we will explain what you need to know.

December 20, 2023

Chancellor announces tax cuts and business boosts

Chancellor announces tax cuts and business boosts

Chancellor Jeremy Hunt announced several tax breaks for individuals and businesses in this year’s Autumn Statement ahead of the General Election next year. While they will help to put a little more money back into our pockets, other decisions made over many years on areas such as the freezing of tax thresholds make them less favourable than they first appear, according to many commentators.

Cuts in National Insurance Contributions (NICs) and major changes for pensions were just some of the big announcements, in the Autumn Statement on November 22, and there is also a freeze on alcohol duty until August next year, which is good news for those who have a favourite tipple.

What were the big announcements?

The NICs cuts were some of the most significant changes – with Class 2 NICs being abolished completely for the self-employed, and Class 4 NICs to fall from 9% to 8% in the next tax year. For employees, Class 1 NICs will also fall from 12% to 10%.

Pension changes are also in the offing too, with the biggest change set to be allowing everyone to have a single pension that they choose for themselves, and they keep for their lifetime, with each employer paying into that pension pot no matter how often they change employers. The real benefit of this is there would be less chance of it getting lost or forgotten about over time.

The State Pension will also rise by more than many commentators had expected, as the Chancellor confirmed the triple lock will remain in place. So, the State Pension will rise by 8.5% – the amount wages rose by in September.

For businesses, the biggest announcement was that full capital expensing which was a measure introduced in the Budget in March and was originally intended to last three years, will now become permanent.

This is just a very small number of the 110 measures the Chancellor announced on November 22. If you want to find out more details about what Jeremy Hunt had to say, you can read his Autumn Statement online, and you can find other supporting documents – which is where the finer details are outlined – at Gov.uk.

ISAs get much needed flexibility

Individual Savings Accounts (ISAs) were given a welcome boost from next April, as the rules will become more flexible, allowing multiple ISAs of the same type to be opened in a single tax year. It will also be possible to make partial transfers of ISAs opened in the current tax year, which gives far greater flexibility to ISA savers than they have previously enjoyed.

One of the main benefits of this change is that savers in Cash ISAs will have the option to benefit more easily from better savings rates as they appear throughout the tax year. Although you can transfer your ISA currently, it is much more restricted, and you would need to move all the money in one go.

It will also be possible to invest in ‘fractional shares’ – where you invest in part of a share in a business, rather than owning a whole share – something that to this point has not been available through an ISA.

However, the ISA limits remain the same – at £20,000 for adult ISAs and £9,000 for Junior ISAs – something many commentators are unhappy about.

IR35 and National Minimum Wage updates

IR35 has been one of the most hotly contested pieces of legislation HMRC has produced, and many people have ended up with huge tax bills after it was applied retrospectively. IR35 is used to determine whether a worker should be considered an employee and therefore under the PAYE tax regime, or whether they can be considered self-employed.

Most often, this question relates to contractors who may be working under their own limited company structure, but if they are working more for one employer than any other, then HMRC believes they should be an employee of that company instead. It has resulted in many high-profile court cases, including for Eamonn Holmes and Gary Lineker.

While the contentious legislation will remain in place, one major change that will be legislated for in the Finance Bill 2023 is to allow organisations who have incorrectly categorised off-payroll workers under IR35 rules, to reduce their additional PAYE liability. This will be done by offsetting Income Tax and Corporation Tax already paid by the worker or their intermediary, where they have been found to not comply with the IR35 rules. These changes will come into effect on April 6, 2024, and typically apply to higher earners.

However, those earning at the other end of the scale got benefits too in the Autumn Statement. Anyone being paid the National Minimum and Living Wage will see their pay increase by 9.88% to £11.44 across the UK for those aged 21 and over, from April 1, 2024. Young people and apprentices will see their wages rise to £6.40 per hour.

Contact us

If you need to find out more about IR35, ISA changes, or any of the other parts of the Autumn Statement that might affect you, please get in touch with us and we would be delighted to help you make sure you are benefiting as much as possible from the changes.

December 18, 2023

Autumn Statement NICs changes in detail

Autumn Statement NICs changes in detail

The biggest tax cuts announced by the Chancellor in his Autumn Statement were in NICs, where self-employed people will no longer pay Class 2 NICs at all from April 6, 2024. Class 4 NICs will be reduced from 9% to 8% from the same date. Class 1 employee NICs – which apply to employees working under PAYE – falls from 12% to 10% from January 6, 2024.

The removal of Class 2 NICs means anyone who is self-employed and has profits above £12,570 will no longer need to pay Class 2 NICs, but they will still receive access to the contributory benefits associated with these payments in the past, such as the State Pension. Benefits will also still be accessed for those self-employed people with profits between £6,725 and £12,570 through a National Insurance Credit. Those who have profits below £6,725 can still make voluntary NICs if they want to.

What is happening for PAYE earners with NICs?

Employees aren’t being left out of the Chancellor’s largesse either – Class 1 NICs is being cut from 12% to 10% from January 6, 2024. The NICs cuts overall will cost the Treasury around £9 billion and put an extra bit of cash into the pockets of around 29m workers in the UK.

Those earning £20,000 a year will keep an extra £149 per year if they are employed, or £254 per year if they are self-employed. This rises to £754 and £556 respectively, when both the employed and self-employed reach £60,000 according to expert calculations.

However, the effect of freezing tax thresholds more than wipes out the benefit from the cuts announced, as the overall tax take has risen to its highest level for 70 years. The cut to the additional rate threshold to £125,140 at the start of the current tax year, will earn £29.3 billion for the Treasury by 2027/28, according to the Office for Budget Responsibility – the equivalent of increasing the basic rate of income tax by 4p. So, it is a little like giving with one hand while taking with the other.

Veterans NICs relief for companies extended

However, employers who hire Armed Forces veterans will be able to continue to claim relief for longer than expected on the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their civilian employment.

HMRC said: “The relief applies to earnings up to the Veterans Upper Secondary threshold, which is £967 per week.”

To qualify for the employers’ relief, the veteran being employed must have been in the UK regular Armed Forces. The relief is available until April 5, 2025.

Rising costs hit Brits hard

Despite these welcome cuts to NICs providing some benefit to workers, the rising cost of living is outpacing the benefits, based on calculations from the Office for Budget Responsibility which shows how much we will each be paying to cover ongoing debts, especially our mortgage debts.

The OBR forecasts that the cost of servicing household debt will rise from £73 billion in 2023 to £151 billion in 2026. This is higher than the peak of 2008, when the debt figure was £98.3 billion. The Liberal Democrats have calculated that the typical household will soon be spending £5,350 per year to “service” their debts, including mortgages which have seen rates rise significantly along with the Bank of England base rate over the past year.

Liberal Democrat Treasury Spokesperson Sarah Olney MP said: “This is a horror show for Brits. There is no end in sight to the mortgage nightmare faced by millions. Not only have household finances been clobbered by a barrage of tax rises, but now they face household debts not seen since the financial crisis.

“The blunt truth is that any tax cut before the election will be more than cancelled out by the mortgage bombshell.”

We can help you

If you want to find out whether you are going to be better or worse off with the NICs changes, or you need some help or guidance to deal with rising mortgage costs, then please get in touch with us and we will be happy to help you.

December 4, 2023

Autumn Statement 2023 – Income Tax

Autumn Statement 2023 – Income Tax

Budget Summary

Income tax rates

The government has stated that the basic rate will remain at 20%, the higher rate at 40% and the additional rate at 45% for 2024/25.

The government reduced the point at which individuals pay the additional rate of 45% from £150,000 to £125,140 for the current tax year and this will continue for 2024/25.

Income tax allowances

The income tax personal allowance and basic rate limit are fixed at their current levels until April 2028. They are £12,570 and £37,700 respectively. For those entitled to a full personal allowance, the point at which they will pay income tax at the higher rate will continue at £50,270.

Dividends

The government has also confirmed that, from 6 April 2024, 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%.

The government will reduce the Dividend Allowance from £1,000 to £500 from 6 April 2024.

Comment
It is estimated that the reduction in the Dividend Allowance will affect £4.4 million individuals in 2024/25 with the average loss to those affected being around £155.

The Scottish and Welsh governments will make their announcements on the devolved elements of taxation policy in due course.

November 30, 2023

Autumn Statement 2023 – National living wage and National minimum wage

Autumn Statement 2023 – National living wage and National minimum wage

Budget Summary

The government has accepted in full the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from April 2024. In addition, from April 2024 the NLW will be extended to 21 and 22 year olds. The rates which will apply from 1 April 2024 are as follows:

AgeNLW18-2016-17Apprentices
From 1 April 2024£11.44£8.60£6.40£6.40

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

Comment
The Department for Business and Trade estimates 2.7 million workers will directly benefit from the 2024 National Living Wage increase.

November 30, 2023

Autumn Statement 2023 – National insurance

Autumn Statement 2023 – National insurance

Budget Summary

The Chancellor announced major changes to the National Insurance contributions (NICs) system.

Employees and NICs

The government will cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024 so that employees can benefit as soon as possible.

Comment
According to the government, this will provide a tax cut for 27 million working people with the average worker on £35,400 receiving a cut in 2024/25 of over £450.

The self-employed and NICs

The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.

Firstly, the government will abolish Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:

  • Self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits, including the State Pension.
  • Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit without paying NICs.
  • Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so.

The government will set out the next steps on Class 2 reform next year.  

Comment
This will mean that a self-employed person who currently pays Class 2 NICs will save at least £192 per year.

Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024.

Comment
This will benefit around two million individuals, recognising the contribution of the self-employed to the economy and ensuring that work pays for all.

Extension of NICs relief for hiring veterans

The government is extending the employer NICs relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025. This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.

November 30, 2023

Autumn Statement 2023 – Individual Saving Accounts

Autumn Statement 2023 – Individual Saving Accounts

Budget Summary

The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.

However, a number of changes will be made to allow multiple subscriptions to ISAs of the same type every year and to allow partial transfers of ISA funds in-year between providers from April 2024.

November 30, 2023

Autumn Statement 2023 – Pension Tax Limits

Autumn Statement 2023 – Pension Tax Limits

Budget Summary

A number of changes were made to the tax regime for pensions for 2023/24 and these include the following, which will remain at their 2023/24 levels for 2024/25:

  • The Annual Allowance (AA) is £60,000.
  • Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
  • No Lifetime Allowance (LA) charge.

In addition, as previously announced the LA of £1,073,100 will be abolished from 2024/25. Changes will be made to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.

November 30, 2023

Autumn Statement 2023 – Backing British Business

Autumn Statement 2023 – Backing British Business

Budget Summary

To increase business investment, the government has announced a number of measures which could raise around £20 billion per year from businesses in a decade’s time. The changes include:

  • Full Expensing will be made permanent.
  • The removal of barriers to critical infrastructure by reforming the UK’s inefficient planning system and speeding up electricity grid connection times.
  • A package of pension reform and driving private investment from insurers into infrastructure by legislating for key reforms to Solvency II.
  • Making £4.5 billion available in strategic manufacturing sectors such as auto, aerospace, life sciences and clean energy from 2025 for five years.
  • New Investment Zones.
  • From April 2024, firms bidding for government contracts over £5 million will have to demonstrate that they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025 and then 30 days in future years.
  • Changes to Research and Development.

Business Rates

The small business multiplier will be frozen for another year, while the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with September’s Consumer Prices Index. These changes will take effect from 1 April 2024 in England.

Freeports and Investment Zones

Both regimes allow businesses in specific locations to benefit from a number of reliefs including Stamp Duty Land Tax relief, enhanced capital allowances, structures and buildings allowances and secondary Class 1 NIC relief for eligible employers.

Both regimes were originally to run for five years but the Chancellor has announced that they will both now run for ten years.

Capital allowances

The new Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand. The rules were originally designed to be effective for expenditure incurred on or after 1 April 2023 but before 1 April 2026. Similar rules apply to integral features and long life assets at a rate of 50%. The government has announced that both allowances will now be made permanent.

The Annual Investment Allowance, which gives a 100% write-off on certain types of plant and machinery, remains at £1 million per 12-month period.

Research and Development (R&D)

The existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%. The notional tax rate applied to loss-makers in the merged scheme will be lowered from 25% to 19%.

A number of other changes will apply to the new regime from April 2024, including that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions. In addition, no new assignments of R&D tax credits will be possible from 22 November 2023, meaning that, in most circumstances, payments of R&D tax reliefs will be paid directly to the company that claims for the R&D.

Comment
Further action may be needed to reduce the unacceptably high levels of non-compliance with the R&D rules and HMRC will be publishing a compliance action plan.

Corporation tax rates

The government has confirmed that the rates of corporation tax will remain unchanged, which means that, from April 2024, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be 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.

VAT

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.

In addition, the government will extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear from 1 January 2024.

Other business measures

A number of other measures have been announced:

  • Making the cash basis of accounting the default position for the self-employed from 2024/25, with an alternative to opt for the accruals basis, together with technical changes to the regime.
  • A number of changes to strengthen the Construction Industry Scheme from April 2024.

November 30, 2023

Autumn Statement 2023 – Other taxation matters

Autumn Statement 2023 – Other taxation matters

Budget Summary

Capital gains

The capital gains tax annual exempt amount will be reduced from £6,000 to £3,000 from April 2024.

Comment
It is estimated that around 570,000 individuals and trusts could be affected in 2024/25.

Inheritance tax

The inheritance tax nil-rate bands will stay fixed at their current levels 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.

November 30, 2023

Autumn Statement 2023 – Back to work

Autumn Statement 2023 – Back to work

Budget Summary

The government is introducing a Back to Work Plan, which includes investment of over £2.5 billion over the next five years. It will significantly expand available support and transform the way people interact with the benefits system. It has been designed:

  • To support those who are long-term unemployed to find work.
  • To ensure that those with long-term sickness and/or disabilities are better equipped to manage their conditions and participate in work, if they are able to do so.

As part of the Back to Work Plan, the government will invest over £1.3 billion over the next five years to help tackle long-term unemployment by establishing an end-to-end process that supports and incentivises unemployed Universal Credit claimants to find work. These policies, which include expanding Additional Jobcentre Support and strengthening Restart, build on previously announced changes.

The government will also strengthen the Universal Credit sanctions regime to enforce the government’s expectation that those who can work must engage with the support available or lose their benefits. As a result, no claimant should reach their claimant review point at 18 months of unemployment in receipt of their full benefits if they have not taken every reasonable step to comply with Jobcentre support.

November 30, 2023

Autumn Statement 2023 – State Benefits

Autumn Statement 2023 – State Benefits

Budget Summary

From April 2024, the government is increasing working age benefits in line with inflation by 6.7%. The government is also maintaining the Triple Lock and the basic State Pension, new State Pension and the Pension Credit standard minimum guarantee will be uprated by 8.5%.

November 30, 2023

Autumn Statement 2023 – Making Tax Digital

Autumn Statement 2023 – Making Tax Digital

Budget Summary

The government has announced the outcome of the review into the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses which includes maintaining the current MTD threshold at £30,000 and design changes to simplify and improve the system. These changes will take effect from April 2026. The government will also ensure taxpayers who join MTD from 6 April 2024 are subject to the government’s new penalty regime for the late filing of tax returns and late payment of tax.

November 30, 2023

Autumn Statement – what you need to know about upcoming changes.

Autumn Statement – what you need to know about upcoming changes.

You could be forgiven for thinking Budget statements are a bit like buses lately – we don’t have one for ages, and then three come along almost at once. While the latest financial proclamation from the Government is known as the Autumn Statement, it is a Budget just the same, and there are some changes you need to be aware of that will be implemented in the coming tax year, which begins on April 6, 2023.

Not only has the highest income tax bracket of 45% remained in place, but the point at which you start paying the 45% tax will be lowered from £150,000 to £125,140 from next April, bringing thousands more people into this highest tax bracket. Estimates suggest it could be as many as 250,000 more hitting the 45% level for the first time. The Chancellor also announced that he is freezing all income tax thresholds until 2027/28 which means more people will be pulled into the higher tax bands and will end up paying more tax. This is known as ‘fiscal drag’ and is a way for the Government to increase its tax take without increasing the rates of income tax.

What about the help with energy bills?

Help with energy bills remains in place, but the Chancellor changed his approach by extending the term of the support to March 2024. But this additional support is less generous and is capped at £3,000 which means many people will pay more than the £2,500 which is in place until April 2023.

Those on means-tested benefits will receive an additional £900 to help pay their energy bills, while pensioners will receive £300 as a one-off payment, and those on some means-tested disability benefits will receive £150.

What else will change?

There were numerous other changes to tax allowances announced, as the Chancellor looks to increase the Government’s tax take to plug a £55 billion spending black hole. For example, the Capital Gains Tax allowance which currently stands at £12,300 will fall to £6,000 next year and then £3,000 in 2024. This will affect anyone crystallising portfolio gains outside of an Individual Savings Account (ISA) and landlords who are selling buy-to-let properties.

The dividend allowance, that will also reduce from the current £2,000 to £1,000 in 2023 and then £500 in 2024, means anyone being paid dividends either through their own business or as part of an investment portfolio, will see those using the full allowance £590 worse off in 2024.

Inheritance tax band frozen

The inheritance tax nil-rate band has also been frozen at £325,000 for the next five years until at least April 2028. HMRC received £4.1 billion in IHT receipts between April and October this year, £500m more than the same period the previous year, and we are likely to see even more money heading to the Treasury coffers via this route in the coming years.

There are many ways to mitigate IHT, so if you are likely to be affected by this tax – and remember, it is no longer just a tax for the rich given the price of the average UK house is now £292,598, according to the data from Halifax – then please get in touch and we can advise you on how to legally reduce this bill.

Some good news for pensioners

However, there was some good news for pensioners as the Chancellor confirmed that the Government would continue to maintain its manifesto pledge to keep the ‘triple lock’ on the State Pension. This means that the State Pension will rise each year in line with September’s inflation figure – which this September was 10.1%, earnings or 2.5% – whichever is highest.

So, pensioners will see their State Pension rise by 10.1% from April, which should take it to £203.85 per week from the current level of £185.15.

Contact us

There are many announcements each time there is an Autumn Statement or Budget and it can be difficult to know what the changes are, and how they affect you or your business. So, if you want any assistance to keep up with what is going on and how 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.

December 1, 2022

Autumn Statement 2022 – National insurance contributions

Autumn Statement 2022 – National insurance contributions

Budget Summary

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.’

November 23, 2022

Autumn Statement 2022 – Capital gains

Autumn Statement 2022 – Capital gains

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Stamp duty land tax

Autumn Statement 2022 – Stamp duty land tax

Budget Summary

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.

ResidentialBand £Rate%Non-residentialBand £Rate%
0 – 250,00000 – 150,0000
250,001 – 925,0005150,001 – 250,0002
925,001 – 1,500,00010Over 250,0005
Over 1,500,00012

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.

November 23, 2022

Autumn Statement 2022 – Land transaction tax

Autumn Statement 2022 – Land transaction tax

Budget Summary

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.

ResidentialBand £Rate%Non-residentialBand £Rate%
0 – 225,00000 – 225,0000
225,001 – 400,0006225,001 – 250,0001
400,001 – 750,0007.5250,001 – 1,000,0005
750,001 – 1,500,00010Over 1,000,0006
Over 1,500,00012

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

November 23, 2022

Autumn Statement 2022 – Business

Autumn Statement 2022 – Business

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – VAT

Autumn Statement 2022 – VAT

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Vehicles

Autumn Statement 2022 – Vehicles

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Welfare, work and pensions

Autumn Statement 2022 – Welfare, work and pensions

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Energy

Autumn Statement 2022 – Energy

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Income tax

Autumn Statement 2022 – Income tax

Budget Summary

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.

November 23, 2022

Autumn Statement 2022 – Inheritance tax

Autumn Statement 2022 – Inheritance tax

Budget Summary

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.

November 23, 2022