Dear Clients,
Today the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, made his Autumn Statement 2022 speech. The chancellor set out the government’s plan to put public spending on a sustainable footing and get debt falling, while protecting vital public services and prioritising the needs of the most vulnerable. Full details are set out in the Autumn Statement document on GOV.UK, alongside other relevant documentation from the Office for Budget Responsibility (OBR) and Treasury. A focused Autumn Finance Bill will be introduced next week to legislate for some of the measures announced today.
Key tax announcements today include threshold and allowances measures, energy levy changes, changes to R&D tax reliefs and Stamp Duty Land Tax (SDLT), as well as confirmation of the Corporation Tax (CT) rate increase and the OECD Pillar 2 measure. Autumn Statement 2022 also includes a small number of avoidance and evasion measures.
Threshold freezes and personal tax allowance measures
- Income Tax and National Insurance contributions thresholds will be fixed at their current rates until April 2028. The government will legislate for the income tax measures in Autumn Finance Bill 2022, and NICs changes through secondary legislation in early 2023
- The Income Tax additional rate threshold (ART) will be lowered from £150,000 to £125,140 from 6 April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The ART for savings and dividend income will apply UK-wide
- The National Insurance contributions secondary threshold will be fixed at £9,100 from April 2023 until April 2028. The Employment Allowance will mean The smallest employers will not be affected
- The Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023, and to £500 from April 2024
- The Capital Gains Tax Annual Exempt Amount will reduce from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. The government will legislate for this measure in Autumn Finance Bill 2022
- The Inheritance Tax (IHT) nil-rate band and residence nil-rate bands will be fixed at their current rates until April 2028
- The VAT registration and deregistration thresholds will be maintained at the current levels of £85,000 for an additional two years from 1 April 2024
Energy Levies
- Energy Profits Levy – from 1 January 2023, the Energy Profits Levy (EPL) rate will rise by 10 percentage points to 35% and will be extended to 31 March 2028. The investment allowance will be reduced to 29% for all investment expenditures (other than decarbonization expenditure) broadly maintaining its existing cash value. Decarbonization expenditure will continue to qualify for the current investment allowance rate of 80%. The government will legislate for these measures in Autumn Finance Bill 2022, except the changes related to decarbonization expenditure which will be legislated for in Spring Finance Bill 2023
- Electricity Generator Levy – the government is introducing a new temporary 45% tax that will be levied on extraordinary returns from low-carbon UK electricity generation arising from 1 January 2023. The levy will only apply to extraordinary returns exceeding £10m. This measure will be legislated through Spring Finance Bill 2023. HMT has published a technical note on this measure on GOV.UK
Corporate Tax changes
- Reforms to R&D tax reliefs – for expenditure on or after 1 April 2023, the Research & Development Expenditure Credit rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. The government is continuing the review of R&D tax reliefs that were launched at Budget 2021 and will consult on the design of a single scheme
- Reforming the audio-visual creative reliefs – the government has launched a consultation on a series of proposals that will go further to incentivize and support the growth of the audio-visual sectors, ensuring these highly skilled industries continue to thrive in the UK. The consultation can be found on GOV.UK
- OECD Pillar 2 – following consultation, the government will implement the globally agreed G20-OECD Inclusive Framework Pillar 2 framework in the UK. For accounting periods beginning on or after 31 December 2023 an Income Inclusion Rule (IIR) and Qualified Domestic Minimum Top-up (QDMTT) tax will be introduced. This will be legislated for in Spring Finance Bill 2023
- Following confirmation of the increase in Corporation Tax to 25% from April 23, consequential changes to the Bank Surcharge and Diverted Profits Tax will be made to ensure that the same differential in rates will apply. In addition, as previously announced, the £1 million level of the Annual Investment Allowance is being made permanent Stamp Duty Land Tax (SDLT)
- SDLT cuts – on 23 September 2022, the government increased the nil-rate thresholds of SDLT from £125k to £250k for all purchasers of residential property in England and Northern Ireland and increased the nil-rate threshold for first time buyers from £300k to £425k. The cut will remain in place until 31 March 2025. This will be legislated through the SDLT (Reduction) Bill
Avoidance and evasion
- Preventing Capital Gains Tax avoidance – to address tax avoidance, the government will legislate in Spring Finance Bill 2023 so that shares and securities in a non-UK company acquired in exchange for securities in a UK close company will be deemed to be located in the UK. This will have effect where an individual has a material interest in both the UK and the non-UK company and where the share exchange is carried out on or after 17 November 2022. Draft legislation has been published alongside explanatory notes and a tax information and impact note on GOV.UK
- Additional Compliance Resource for HMRC – the government is investing a further £79 million over the next 5 years to increase HMRC’s capacity to tackle serious fraud, and to reduce non-compliance among wealthy taxpayers
- Transfer pricing documentation: Master File/Local File – from April 2023, large multinational businesses operating in the UK will be required to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD‘s Transfer Pricing Guidelines (Master File and Local File). This will be legislated for in Spring Finance Bill 2023
Other measures include:
- Cost of Living Support – additional cost of living payments to support the most vulnerable households, including up to £900 of additional support in 2023-24 for households on means-tested benefits, including those receiving tax credits
- Changes to the taxation of electric vehicles – from April 2025, electric cars, vans and motorcycles will begin to pay Vehicle Excise Duty (VED), in the same way as petrol and diesel vehicles
- Company Car Tax (CCT) Rates – the government is setting rates for CCT until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022
- First Year Allowance for electric vehicle charge points – the government will extend the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for Corporation Tax and 5 April 2025 for Income Tax
- A substantial package of reforms to business rates has also been announced. Further details are set out on GOV.UK