10 things you need to know about the autumn statement as a business owner
we wouldn’t blame you if your head is spinning from the not-so mini-budget in September, the subsequent u-turns and reversals of reversals. so, by the time the Autumn Statement rolled around on 17 November, you were suffering from budget fatigue.
But don’t worry - we’ve got you covered. Here’s our 10 point breakdown of the key announcements from the Autumn Statement you need to know as a business owner and what they could mean for you.
1) Income tax personal allowance frozen at £12,570 until April 2028.
This is an example of what is known as “stealth tax”. Whilst it is not an immediate tax rate increase, by freezing the personal allowance in a high-inflation environment, as you earn more over these next few years, you will move into a higher tax bracket and keep less of your extra income.
Also, the higher rate income tax threshold (i.e. when you start paying 40% on additional earnings) was set at £37,700 to 2025/26; the Chancellor has extended that freeze until April 2028. Once your income tips you into the 40% band your savings allowance drops from £1,000 to £500 per year.
2) The additional rate income tax threshold has been reduced from £150,000 to £125,140.
This will impact you from April 2023 if you are a higher earner. On earnings more than £125,140, you will pay the additional rate of 45% if you are self-employed or the additional dividend rate of 39.35% if you are a limited company.
3) Employers’ national insurance contribution threshold frozen until 2028.
The secondary threshold has been frozen at £9,100.
This will mean higher employment costs if you employ staff and their salaries rise. But if you are a smaller employer, you can still benefit from the Employment Allowance which is unchanged at £5,000.
4) Reduction in the dividend tax-free allowance
The dividend allowance will be cut in half to £1,000 from April 2023 and then again to £500 from April 2024.
You may pay yourself dividends if you are a limited company and will unfortunately be likely to pay more tax on these as a result of these changes.
5) A freeze in the VAT registration threshold
Despite rising inflation, the VAT threshold has been frozen at £85,000 until 2026 which is the turnover at which businesses need to register.
If your small business is making taxable supplies and earning more as a result of rising prices, you may get closer to the threshold to register for VAT. You’ll then need to charge your customers an extra 20% (or other appropriate VAT rate) to pass over to HMRC.
6) Reduction to Capital Gains Tax (CGT) Annual exempt amount
The annual CGT allowance, which is the amount of profit you can make from the sale of an asset or investment before you are taxed, has been reduced from £12,300 to £6,000 from April 2023 and then will be halved to £3,000 in April 2024.
This will primarily affect you as a business owner if you are looking to sell your business or individual assets but also if you are a buy-to-let landlord or hold investments outside of tax-free ISAs. It means that when it comes to the sale you get to keep less of your gain as you will be handing more over in tax.
7) Corporation Tax rise from 19% to 25% still going ahead in April 2023
You will pay 25% corporation tax if your company profits are greater than £250,000. Any company with less than £50,000 will continue at the 19% rate. If your company profits fall between the two figures, you will pay a tapered rate.
8) Changes to SME R&D tax relief
The deduction for R&D costs has been reduced to 86% (from 130%) and the tax credit rate reduced to 10% (from 14.5%) for expenditure from April 2023.
This is a significant reduction and will particularly impact you if you are an SME or start-up undertaking innovative work.
9) National Living Wage Increase
If you have employees, the government has announced that the National Living Wage will increase to £10.42 from April 2023.
10) Online Sales Tax not Introduced
This was a consideration for the Government to rebalance the “bricks vs. clicks” tax burden but it was confirmed in the Autumn Statement that it would not be taken further.
There were also changes to Business Rates announced in the Budget on 17 November 2022 which may be relevant to you if you have a business premises, see the following Government factsheet for more information: https://www.gov.uk/government/publications/autumn-statement-2022-business-rates-factsheet/autumn-statement-2022-business-rates-factsheet
IMPORTANT INFORMATION: The way in which tax charges and tax relief are applied depends upon individual circumstances and may be subject to change in the future. The information in this blog is based upon our understanding of the Chancellor’s 2022 Autumn Statement, in respect of which specific implementation details may change when the final legislation and supporting documentation are published. This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.
