Autumn Statement 2022

Autumn Statement 2022

18th November, 2022, Kayleigh Wilson

Kayleigh Wilson FCCA CTA, Tax Manager at Stephenson Smart, responds to the Autumn Statement 2022.

It has been a turbulent few months in UK politics, that has impacted hugely on our economy.  On 17 November 2022 the current Chancellor, Jeremy Hunt, announced his Autumn Statement to the Commons; the government’s third fiscal statement in as many months.

This was a statement that was supported by research from the Office of Budget Responsibility and, most evident by his smiling and head nodding when it was delivered, the Prime Minister, former Chancellor, Rishi Sunak.

The Chancellor laid out three core priorities of stability, growth and public services. The government is seeking a balanced path to support the economy and return to growth, partially through public spending restraint and partially through tax rises.

But how does the Autumn Statement 2022 announcement affect you?

Income tax

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.

National Insurance contributions

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.

Capital Gains Tax

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.

Inheritance tax

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.

Stamp Duty Land Tax

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.

 

Residential

Band £

Rate

%

Non-residential

Band £

Rate

%

0 – 250,000 0 0 – 150,000 0
250,001 – 925,000 5 150,001 – 250,000 2
925,001 – 1,500,000 10 Over 250,000 5
Over 1,500,000 12

 

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.

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.

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.

Vehicles

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.

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.

Energy

The Autumn Statement 2022 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.

 

It was predicted that this would be a tough fiscal statement, with tax rises announced.  The government blaming the long-term impact of Covid on the global economy and supply chains, and Russia’s war on the Ukraine.

The Office of Budget Responsibility has now said that we are in recession, this Autumn Statement 2022 designed to bring stability and growth to our economy to lessen the impact. Let’s just hope that the current Prime Minister and Chancellor stay in post long enough to see the announced changes through.

If we can help support you to understand the impact of these announced changes to you and your business, please get in touch.

Response to Jeremy Hunt Financial Statement

Jeremy Hunt Financial Statement Response

18th October, 2022, Kayleigh Wilson

In a bid to stabilise the countries financial outlook, Jeremy Hunt, the new Chancellor, couldn’t wait until 31st October to make his ‘mini-budget’ scourging financial statement, instead opting to make an ‘emergency budget’ statement in the House of Commons, reversing most of what Kwasi Kwarteng had set out.

Kayleigh Wilson, Tax Manager at Stephenson Smart Accountants and Business Advisors, analyses what has now been announced, and what it means for you and your finances:

It is important to remember that as many statements, by as many chancellors as the government wish to appoint, can be made in the House of Commons, but until they are enacted as law the changes they announce don’t come into force.

For example, when Kwasi Kwarteng announced that Corporation Tax would no longer go up to 25% in April 2023 this wasn’t passed as tax legislation so effectively nothing has changed, as we were all still working to the legislation that had previously been passed, stating that Corporation Tax will go up to 25%, for some companies, from 19% in April 2023.

So, what do the rest of today’s announcement actually mean?

National Insurance contributions

The reversal of the temporary increase in National Insurance Contributions from 6 November 2022 still stands.

The UK-wide 1.25% Health and Social Care Levy, due to come in from April 2023, remains cancelled.

How will this impact on employees and employers

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

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

How will this impact on 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%.

 

Income tax

Jeremy Hunt has announced that the cut in the basic rate of income tax, from 20% to 19%, has been cancelled ‘indefinitely’.

It had already been announced that there will still be a 45% additional rate of income tax, this will not now change.

Dividends

The announced change to reduce the rates paid on dividends has now also been scrapped.  Meaning the dividend ordinary rate will stay at 8.75% and the dividend upper rate will remain at 33.75%.

 

Corporation tax rates

As previously mentioned, the planned change to corporation tax from 19% to 25% will take place from April 2023, for the majority of companies.

 

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, 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. Kwasi Kwarteng had announced that the temporary £1 million level of the AIA will become permanent, and the proposed reduction will not occur.  This still stands.

 

Stamp Duty Land Tax

The changes announced by Kwasi Kwarteng to the Stamp Duty Land Tax (SDLT) regime will remain in place.

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

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

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland.

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

Residential rates may be increased by 3% where further residential properties are acquired.

 

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. Kwasi Kwarteng had announced a repeal of the off-payroll working rules from 6 April 2023, this has now been reversed by Jeremy Hunt.

 

Economic Advisory Council

Jeremy Hunt also announced the formation or another independent advisory group, the Economic Advisory Council, who will be made of analysts and accountants and should help to give the government more independent, informed advise on fiscal matters going forward.

 

In the financial statement, it was announced that by keeping the base rate of income tax at 20%, not cutting the Corporation Tax rate and reinstating the top rate of income tax will raise approximately £32 billion each year.

There are still more announcements to be made in the medium-term fiscal plan statement on 31st October 2022, that will be based on the judgement and economic forecasts of the Office for Budget Responsibility.

I am a tax specialist at Stephenson Smart and, supported by a team of qualified, experienced accountants, we are here to help you navigate these unstable times.

Please contact us if we can help you.

Related articles: Mini Budget September 2022 – ‘A Plan for Growth’

Mini Budget September 2022 – ‘A Plan for Growth’

Mini Budget September 2022 – ‘A Plan for Growth’

24th September, 2022, Kayleigh Wilson

Considering the new Chancellor’s statement on ‘The Growth Plan’ was being dubbed by the media as a mini Budget, he managed to pack it with a stream of policy announcements.

Kayleigh Wilson, Tax Manager at Stephenson Smart Accountants and Business Advisors, gives a run down on the changes announced and what it means for you and your finances.

The Mini Budget

Kwasi Kwarteng’s statement to the House of Commons was not subject to a forecast from the Office for Budget Responsibility, with many predicting that this may mean a full Budget statement is still to come, before the end of the year.

As is now becoming the norm, before Mr Kwarteng stood up to make his statement on ‘The Growth Plan’ much of what he had to say about energy support for businesses and households, bankers’ bonuses, investment zones and reversals to NICs had already been announced.

But behind all the theatre, what do the policy announcements actually mean for you:

 

National Insurance contributions

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 new Chancellor has decided to:

  • reverse the temporary increase in NICs from November and
  • cancel the Health and Social Care Levy completely.

The Health and Social Care Levy was expected to raise around £13 billion a year to fund health and social care and the Chancellor has confirmed that funding will be maintained at the same level as if the Levy was in place, funded from general taxation.

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.

How will this impact on employees and employers

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

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

How will this impact on 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%.

 

Income tax

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 is now being accelerated so that it takes effect from April 2023.

The government states that this reduction is worth over £5 billion for workers, savers and pensioners. Also, that 31 million taxpayers will benefit in 2023/24, with an average gain of £170.

In addition, to ‘incentivise enterprise and hard-work and simplify the tax system’, the government will abolish the 45% additional rate of income tax from April 2023. Consequently, there will be a single higher rate of income tax of 40%.

These changes will generally apply to taxpayers in England, Wales and Northern Ireland.

There are a number of tax consequences which stem from these changes. One of them is the amount of tax relief given at source on pension contributions and Gift Aid donations. This is currently given at the basic rate of 20%. The government has stated that there will be a four-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300 million. However, there was little comment on pension contributions other than that there will also be a one-year transitional period for Relief at Source pension schemes to permit them to continue to claim tax relief at 20%.

Dividends

From April 2023:

  • the dividend ordinary rate of 8.75% will reduce to 7.5%
  • the dividend upper rate of 33.75% will reduce to 32.5% and
  • the dividend additional rate will be abolished.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

 

Corporation tax rates

It had been previously announced that the rate of corporation tax would increase for many companies from April 2023 to 25%. This change will now not go ahead, leaving the rate of corporation tax at 19% for the majority of companies.

The 19% UK corporation tax rate is significantly lower than the rest of the G7 and the lowest in the G20.

In line with this change, the Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

 

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, 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. Interestingly, these allowances were not mentioned, other than minor amendments to the current rules, so it appears the scheduled withdrawal of them will occur in 2023.

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

 

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.

 

Investment Zones

As part of the government’s plan to drive economic growth and encourage development the Chancellor confirmed that Investment Zones will be established across the UK, one of which is in Norfolk.

These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The government is already in discussions with 38 local authorities to establish investment zones in England. In addition, it says it will work closely with the devolved administrations to offer the same opportunities in Scotland, Wales and Northern Ireland.

Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

In addition, businesses will receive full Stamp Duty Land Tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employee earnings up to £50,270 per year.

There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

As well as time-limited tax benefits there will be designated development sites that will release more land for housing and commercial development in the zones. The need for planning applications will be minimised and streamlined.

 

Stamp Duty Land Tax

Several changes are made to the Stamp Duty Land Tax (SDLT) regime. 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 is increased from £125,000 to £250,000, with immediate effect.

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

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland.

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

Residential rates may be increased by 3% where further residential properties are acquired.

 

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. In a surprise announcement, the government has stated that it will repeal the off-payroll working rules from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

According to the government, this will free up time and money for businesses that engage contractors, that could be put towards other priorities. The change will also reduce the risk that genuinely self-employed workers are impacted by the off-payrolling rules.

 

Energy bills for businesses

On 21 September 2022 the government announced a new scheme, the Energy Bill Relief Scheme, which is designed to cut energy prices for non-domestic energy customers, such as businesses, charities and public sector organisations. The new scheme is in addition to the recently announced Energy Price Guarantee for households.

The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts. Running for an initial six-month period, the scheme will apply to energy usage from 1 October 2022 to 31 March 2023. According to the government, savings will first be seen in businesses’ October bills.

Businesses are not required to take action or apply for the scheme; support will be automatically applied to bills.

The government intends to conduct a review of the scheme in three months to assess:

  • how effective it has been in giving support to vulnerable, non-domestic customers
  • which groups of non-domestic customers remain vulnerable to energy price rises
  • the extent to which the scheme could either be extended or further targeted.

Support after 31 March 2023 will be determined following the review.

 

Over the next few weeks, the government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back the financial services sector.

This raft of changes will have a big impact for the finances of individuals and businesses, in the immediate term to National Insurance Contributions and Stamp Duty Land Tax and the longer term in other areas, if they all come into place in the timelines given.

I am a tax specialist at Stephenson Smart and, supported by a team of qualified, experienced accountants, we are here to help you navigate the changes made in this mini Budget.

Please contact us if we can help you.

 

Spring Statement response by Kayleigh Wilson of Stephenson Smart

Spring Statement 2022

24th March, 2022, Kayleigh Wilson

Spring Statement

Against a backdrop of rising inflation, Chancellor Rishi Sunak presented his first Spring Statement on Wednesday 23 March 2022.

The Chancellor announced a cut in fuel duty for petrol and diesel as he sought to ease the impact of rising prices for households and businesses.

He will lift the starting thresholds for National Insurance contributions (NICs) and also pledged a cut to income tax in 2024. However, the Health and Social Care Levy will still be implemented in April 2022.

For businesses, there is an increase to the Employment Allowance, as well as relief from business rates on a range of green technologies and help with training and the adoption of digital technology.

Increase in the National Insurance threshold and Lower Profit Limit

There had been speculation that the Chancellor would try and make some kind of tax cut to answer his critics that he was not doing enough to ease the cost of living rises. His solution was to announce an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit in his 2022 Spring Statement, to take effect from July 2022.

Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax and National Insurance contributions (NICs) the threshold will increase from 6 July 2022 from £9,880 to £12,570.

The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4 NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023 the limit is increased further to £12,570.

In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. £3.15 per week is payable where profits are over £11,908.

Temporary increase in National Insurance rates

The temporary increase in National Insurance rates (the Health and Social Care Levy) will still come into effect from April 2022.

There will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.

With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.

Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.

For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that upper profits limit.

Income tax reduction

The Chancellor announced the reduction in the basic rate of income tax for non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland to 19% from April 2024.

The change will be implemented in a future Finance Bill.

Fuel duty

A welcome measure announced in the Spring Statement to help all motorists – individuals, small businesses and hauliers – fuel duty for petrol and diesel is cut by 5 pence per litre across the whole of the UK. This measure took effect from 6pm on 23 March 2022 and is in place for 12 months.

Increased Employment Allowance

Employers are able to claim the Employment Allowance which reduces their employer Class 1 NICs each year.

In the Spring Statement, the Chancellor announced an increase from April 2022 of £1,000 for eligible employers to reduce their employer NICs by up to £5,000 per year.

The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses, such as companies under the control of the same person or persons, are only entitled to one Employment Allowance between them.

VAT on energy saving materials

The Chancellor announced a UK wide, time-limited zero rate of VAT from April 2022 for the installation of energy saving materials. This will apply to installations such as rooftop solar panels.

This is in addition to the extension of the VAT relief to include additional technologies and the removal of complex eligibility conditions.

Green reliefs for business rates

The government is introducing targeted business rates exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks with their own rates bill. It was announced in the Spring Statement, that these measures will now take effect from April 2022, a year earlier than previously planned.

Spring Statement Summary

These are the main highlights of the Spring Statement announcements by the Chancellor. An above average amount of changes to allowances and tax bands for a Spring Statement, some of which come into play very soon and will have an immediate effect on calculations.

At Stephenson Smart we are specialists in helping people navigate their business and personal finances.  You should contact us for advice before taking any action as a result of the contents of this response.

Related pages: Budget 2021

Autumn Budget 2021

Stephenson Smart - Business

27th October, 2021, Dan Jastrzebski

Autumn Budget 2021: Response by Dan Jastrzebski

Today’s Autumn Budget 2021 announcement and Spending Review by the Chancellor focused on economic recovery and investment.

Dan Jastrzebski, partner at Stephenson Smart, analyses the main changes that will impact upon our clients and local businesses.

Business Rates

Business groups have been lobbying for the government to support the high street and ‘brick and mortar’ businesses by looking at business rates in this Budget.

In response, the Chancellor announced three new measures that will directly affect business rates:

Firstly, a new temporary 50 per cent business rates relief for the Retail, Hospitality and Leisure industry in the financial year 2022/23.  This is alongside freezing the business rates multiplier for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.

The government will also look to introduce a 100 per cent improvement relief for business rates from 2023. This will provide 12 months relief from higher bills for occupiers, where eligible improvements to an existing property increase the rateable value.

Also introduce targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100 per cent relief for eligible heat networks, to support the decarbonisation of non-domestic buildings from 1 April 2023 until 31 March 2035.

Taxes

There was very little mention of tax changes in the Autumn Budget 2021 announcement. However, there are tax changes afoot that are already in progress.

The Health and Social Care Levy is due to come into effect in April 2022; the income generated from this is due to be ring-fenced for spending on health and social care. Alongside this, it was also announced that there would be a 1.25 per cent increase to dividend tax rates.

We also already know that the main rate of Corporation Tax will rise from 19 per cent to 25 per cent from April 2023.

However, the main changes to the tax system that the government are forecasting to bring in income to the Treasury are aimed at how the self-employed pay income tax.

From April 2024 there will be three main changes to income tax for the self-employed:

Sole traders and landlords with annual business or property income over £10,000 a year will be eligible for Making Tax Digital for Income Tax Self Assessment from 6 April 2024.  This means that those businesses who are eligible will be required to submit their income and expenses via digital software, in a more timely, quarterly manner. Read more here.

From the same date, the government are looking to reform income tax basis periods so businesses’ profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.

Lastly, the government are reforming penalties for late submission and late payment of tax for Income Tax Self Assessment, again from April 2024, for those taxpayers required to submit digital quarterly updates through Making Tax Digital.

Just these changes to tax strategy are forecast to bring in an additional £440 billion to the Treasury by 2026/27.

A surprising amount of the Chancellor’s Autumn Budget 2021 announcement was taken up by talking about alcohol duty. The main change worth mentioning is the reduction in duty on draft alcohol by 5 per cent – another welcome hand of support to the hospitality industry. However, increases to the living wage of 6.6 per cent for over 23 year olds from April 2023 could offset the reduction in duty meaning no decrease in prices for the consumer.

Our teams will look forward to further direction from the government on the announcements made today, and in the run up to the Budget, so that we can ensure our clients are compliant with any changes and managing their tax liabilities accordingly.

If you would like more detailed, one-to-one advice on any of the issues raised in the Chancellor’s Autumn Budget 2021 speech, please get in touch.

Profile: Dan Jastrzebski ACA CTA

Related Pages: Budget 2021 & Making Tax Digital

Related Articles: Autumn Budget Predictions

Further Reading: Autumn Budget and Spending Review 2021

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