Yesterday, Chancellor of the Exchequer Jeremy Hunt announced a series of measures in their Autumn Statement that will have an impact on your small business and landlord clients. Here are some takeaways from his announcement:
Business tax and National Insurance changes
The government will increase the rate at which people pay Class 2 National Insurance
From April 6th, 2023, the rate of Class 2 National Insurance will increase to £3.45 per week for self-employed clients.
VAT registration threshold to remain at £85,000
The Chancellor confirmed that the threshold for VAT registration will remain at £85,000 of sales until 1st April 2026.
Employment Allowance to remain at £5,000
The Employment Allowance will remain at £5,000 indefinitely.
Corporation Tax rate to remain at 19% for smallest companies
From 1st April 2023:
Smaller companies with taxable profits of less than £50,000 per year will continue to pay Corporation Tax at the ‘small profits rate of 19%.
Companies with taxable profits between £50,001 and £250,000 a year are subject to Corporation Tax at a rate of 25%. A ‘marginal rate relief’ deduction is available for the first few thousand pounds.
Companies with taxable profits of £250,001 or more must pay Corporation Tax at a rate of 25%.
National Minimum Wage thresholds increased
From April 2023, all thresholds for the National Minimum Wage will increase. Meanwhile, the National Living Wage—which applies to workers aged 23 and over—will rise by 9.7% from £9.50 an hour to £10.42 per hour
Increase in bills capped for the smallest businesses affected by reductions in rate relief
From April 1, 2023, the smallest businesses affected by reductions or changes in eligibility to small business rate relief or rural rate relief will be capped at 600 pounds per year.
Research and Development (R&D) changes to be implemented
From April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, while the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%. The SME credit rate will also decline—from 14.5% down 10%.
Personal tax and National Insurance changes
Additional rate of tax threshold reduced
The threshold for the additional rate of tax will be reduced from £150,000 to £125,140 from April 2023.
Changes to income tax thresholds for those who earn non-savings and non-dividend incomes only apply in England and Northern Ireland.
The Scottish government will announce it’s own Income Tax rates or thresholds while the Welsh government has the power to vary Income Tax rates but has never yet done so.
All other changes, including changes to the thresholds where they apply to savings or dividend income, will be applied UK-wide.
Other Income Tax and National Insurance thresholds frozen until April 2028
Pre-existing thresholds for all rates of Income Tax and National Insurance are to be frozen until April 2028, including Personal Allowance.
Dividend allowance cut
The dividend 0% tax allowance will be cut from £2,000 to £1,000 In April 2023. In April 2024, it will be reduced further to £500.
Adjustments to the Annual Exempt Amount for Capital Gains Tax
The Annual Exempt Amount for Capital Gains Tax will be reduced from £12,300 to £6,000 from April 2023. In April 2024, it will be reduced further to £3,000.
Electric cars no longer are exempt from Vehicle Excise Duty
In April 2025, electric cars will be liable to Vehicle Excise Duty.