The Chancellor, Jeremy Hunt, announced a wide range of tax rises, mass tax allowance freezes and spending cuts in his Autumn Statement today.
Main Points – Tax rates and thresholds
- The Dividend allowance will be cut to £1000 for 2023/4, and to £500 in 2024/25.
- The Capital Gains Tax annual exemption will be cut from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
- The additional (45%) income tax threshold will be cut from £150,000 to £125,140 from April 2023.
- The Employment Allowance – reducing NI for employers – will remain at £5,000.
- The VAT registration threshold will remain at £84,000 for a further 2 years from April 2024.
- Income tax personal allowance frozen until April 2028 (extended by 2 years on current plans).
- Higher rate tax threshold frozen until April 2028.
- Inheritance tax threshold frozen until April 2028.
- National Insurance thresholds frozen until April 2028.
- The National Minimum Wage will increase by 9.7% to £10.42 from April 2023.
- For small firms affected by changes to business rate relief, any increases from April 2023 will be capped at £600 per year.
- The Research & Development Expenditure Credit (RDEC) will rise from 13% to 20%.
- The SME additional deduction will be cut from 130% to 86% from April 2023. The SME credit rate will also be cut – from 14.5% to 10%.
- Kwasi Kwarteng’s plans to create 200 new Investment Zones has been scrapped. The initiative would have cost £12bn a year.
- From April 2025, electric cars will no longer be except from Vehicle Excise Duty.
- The Household Energy Cap will increase from £2,500 to £3,000 for the average household from April 2023.
The real hit – the April 2023 Corporation Tax increase
The dividend allowance cut will cost limited company contractors a few hundred pounds in extra tax next year.
What wasn’t mentioned in the Autumn Statement was the pre-announced April 2023 CT increase, which will cost the average limited company owner thousands each year. You can find out more here.
And in addition to these measures, the effect of fiscal drag on income tax and National Insurance will be painful for contractors, as will the cut in the annual CGT exempt allowance.
You can read the Autumn Statement documents here.