It’s been a rollercoaster in the tax and economics arena over recent months and today’s Autumn Statement has hopefully slowed things down but there was plenty of tinkering by Jeremy Hunt, which will no doubt be labelled in the press as “stealth taxes”.
We already knew the main changes on income tax and corporation tax, which are likely to mean a switch to salary from dividends for the first time in many years. I’ll provide comprehensive analysis and guidance on that topic in the coming weeks as business owners will want to plan ahead of those changes in April 2023.
Many thresholds have been frozen until 2028 and the threshold for the highest rate of income tax (45%) will reduce from £150,000 to £125,140 from April 2023, resulting in an extra £1,243 for those affected. The annual CGT allowance will reduce from £12,300 to £6,000 in April 2023 and £3,000 in April 2024. The tax free dividend allowance will also reduce from £2,000 to £1,000 in April 2023 and £500 in April 2024.
Thankfully, R&D tax relief wasn't abolished (despite the rumours) but the additional deduction under the SME scheme is reducing from 130% to 86% in April 2023 with the repayable tax credit also reducing from 14% to 10.5%. Interestingly, the rate under RDEC is increasing from 13% to 20%. In net cash tax terms, taking into account the corporation tax increases, large companies will receive an increased net RDEC of 15% (currently 10.5%) and SMEs will receive reduced relief of 18.6% - 21.5% (previously 25% -33%).
There were other announcements impacting electric vehicles with Vehicle Excise Duty being introduced from April 2025, together with an increase to the benefit in kind rate of 1% per annum at the same time. This will increase the tax on electric vehicles but they are still likely to be more financially attractive than non-electric vehicles.
We will need to digest the finer details but on the face of it the changes are not as dramatic as some were predicting which will hopefully provide much needed stability.
