Houses of Parliament

The Autumn Statement 2022: The Key Measures Announced for Businesses

On Thursday 17th November 2022, The Chancellor, Jeremy Hunt, delivered his Autumn Statement. Here we outline the key measures announced for businesses, some of which have changed since the Mini-Budget Statement in September.

HEADLINE ANNOUNCEMENTS:

1. Corporation Tax: As previously announced, corporation tax will rise from 19% to 25% in April 2023.

2. R&D Relief: In April 2023, R&D relief will be reduced for SMEs. The deduction rate for qualifying R&D expenditure under the SME scheme will be cut from 130% to 85% and the cash repayment credit under the SME scheme will also be reduced from 14.5% to 10%. However, in some relatively good news, the credit amount available under the large company R&D expenditure credit (RDEC) scheme will be increased from 13% to 20%.

3. Dividend Allowance: The dividend allowance will be halved from £2,000 to £1,000 from 6th April 2023 and again to £500 in April 2024. Dividends received above this level will be subject to the higher dividend rates that were introduced from 6 April 2022 and continue to apply (8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers).

4. Capital Gains Tax: The capital gains tax (CGT) annual allowance will reduce from £12,300 to £6,000 in April 2023 and to £3,000 in April 2024.

5. Inheritance Tax: The inheritance tax nil rate band threshold of £325,000 per taxpayer will remain frozen until April 2028.

6. Employers NIC: The current threshold will be frozen until April 2028. The Employment Allowance of £5,000 will be retained at its new, higher level until March 2026.

7. Income Tax: The threshold for the 45p rate of income tax will be reduced on 6th April 2023, from £150,000 to £125,140. A freeze will be maintained for income tax personal allowance, higher rate threshold and main NIC thresholds (including Employer NIC).

8. Business Rates: The government announced a support package of £13.6bn to reduce the impact of business rate increases on businesses in April 2023. Relief for retail, hospitality and leisure industries will also be increased from 50% to 75% (worth up to £110,000 per business) and extended to 2023-24.

9. The Energy Price Guarantee: The Chancellor committed to maintaining the Energy Price Guarantee, but on less generous terms. The £2,500 cap on typical energy bills will increase to £3,000 by April. Business leaders who were hoping for more clarity on what will happen to the Energy Bill Relief Scheme (EBRS) after April 2023 will be concerned by the lack of detail.

10. Electric Vehicles: From April 2025, Electric Vehicles will not be exempt from Vehicle Excise Duty.

11. VAT: The VAT registration threshold will also be maintained at £85,000 until 1 April 2026.

The Economy

  • The Office for Budgetary Responsibility has forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year
  • The UK is now in recession
  • GDP is forecast to fall by 1.4% in 2023 before then rising in the following three years
  • Unemployment is expected to rise from 3.6% today to 4.9% in 2024 before then starting to fall
  • Borrowing will be halved with this Budget in place – borrowing is forecast this year at 7.1% of GDP (£177 billion), falling next year to 5.5% and then to 2.4% by 2027/28
  • Public Sector borrowing over the 5-year period must be below 3% of GDP

Business

  • As previously confirmed, the main rate of Corporation Tax will increase to 25% from April 2023
  • The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and then to £500 from April 2024
  • The annual exempt amount in Capital Gains Tax will be reduced £12,300 to £6,000 next year and then to £3,000 from April 2024
  • The threshold for employer National Insurance Contributions will be fixed until April 2028, with the Employment Allowance to be maintained at the higher level of £5,000
  • VAT registration threshold to be maintained until March 2026
  • The government announced a support package of £13.6bn to reduce the impact of business rate increases on businesses in April 2023

R&D Relief

  • In April 2023, R&D relief will be reduced for SMEs. The deduction rate for qualifying R&D expenditure under the SME scheme will be cut from 130% to 85% and the cash repayment credit under the SME scheme will also be reduced from 14.5% to 10%.
  • The credit amount available under the large company R&D expenditure credit (RDEC) scheme will be increased from 13% to 20%.

Tax and National Living Wage

  • The highest rate tax threshold where earners pay the 45p rate will be reduced from £150,000 to £125,140
  • Current levels of income tax personal allowances, national insurance thresholds, and inheritance tax to be maintained for a further 2 years through to April 2028
  • National Living Wage will be increased by 9.7% to £10.42 per hour from April 2023

Pensions

  • Pension credit to be increased by 10.1%
  • The Government’s pledge to protect the Pensions Triple Lock will be fulfilled
  • State Pension to increase in April 2023 by £870 per annum

Defence

  • The Defence budget to be maintained at least 2% of GDP
  • £2.3 billion of military support provided to Ukraine since the start of Putin’s invasion

Health and Social Care

  • Additional grant funding of £1bn this year and £1.7bn next year to be allocated to Adult Social Care to free up some of the 13,500 hospital beds occupied by those who should be at home and deliver an estimated 200,000 more care packages over the next 2 years
  • NHS budgets to be increased in each of the next 2 years by an extra £3.3bn
  • NHS to tackle waste and inefficiency

Education

  • For next year and the following year, an extra £2.3bn will be invested in schools Climate and Environment
  • From April 2025 electric vehicles will no longer be exempt from Vehicle Excise Duty
  • The Government has pledged full commitment to the Glasgow Climate Pact agreed at COP26 to include a 68% reduction in emissions by 2030

Energy

  • The Government is to proceed with a £700m investment in a new plant at Sizewell C to provide reliable, low-carbon power to 6 million homes over 50 years
  • Target to reduce energy consumption from buildings and industry by 15% by 2030
  • Maintaining plan to spend £55bn to help households and businesses with energy bills
  • From April 2023, the energy price guarantee will continue for a further 12 months at a higher level of £3,000 for the average household
  • Additional cost of living payments next year – £900 to households on means tested benefits, £300 to pensioner households and £150 for individuals on disability benefit
  • For households using alternative fuels, ie oil or LPG, to heat their homes, support will be doubled from £100 to £200 this winter

Housing

  • Stamp Duty cuts announced in the mini budget will remain in place until 31 March 2025.
  • Social housing rents to be capped at a maximum increase of 7% in 2023/24

Department for Work and Pensions

  • A sharp increase of 630,000 economically inactive adults of working age has been seen since the start of the pandemic. The Work and Pensions Secretary to conduct a thorough review into workforce participation to be concluded early in the New Year
  • 600,000 more people on Universal Credits to meet with a work coach to get the support they need to increase hours or earnings and increase available labour
  • £280m to be invested in crackdown on benefit fraud and error over the next 2 year

Any Questions?

We would be very happy to answer any questions you may have about the measures announced by the Chancellor.

If you have any questions please call us on: 0161 249 5040 or email: partners@leonherman.co.uk

Disclaimer

This material is published for information only. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by Leonherman.

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