Autumn Statement 2022: winter fast approaching

Insight

18.11.2022

Chancellor Jeremy Hunt’s long-anticipated Autumn Statement contains mercifully few surprises by the standards of recent UK fiscal announcements. The Chancellor has opted to freeze and reduce thresholds and allowances for existing taxes, rather than introduce new rates and taxes altogether. However, while the status quo has been maintained in many cases, individuals and businesses will nevertheless see their tax burden rise in real terms against rampant inflation. Perhaps more notable is what was not mentioned after much speculation. In particular, there was no mention of the remittance basis or domicile changes, although radical change was expected by many.

We have set out a high-level summary of the key changes below.

Personal taxes

The additional rate threshold will be decreased from £150,000 to £125,140 from 6 April 2023. This will bring many more individuals into the 45 per cent top rate.
The income tax personal allowance and higher rate threshold, as well as the national insurance contributions upper earnings limit and upper profits limit, were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. This will mean that as wages go up, the tax burden will increase. In other words, a covert tax increase.
The government will reduce the dividend allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024. This was introduced to compensate for the removal of the 10 per cent tax credit which used to be available on dividends to account for the tax already paid by the company. There has been no mention of bringing back the tax credit though.
The government will reduce the capital gains tax annual exempt amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. This will likely mean more people filing tax returns where they would previously have been protected by the annual exempt amount.
Of course, there had to be at least one measure to counter perceived tax avoidance and evasion. This time it will be measures to prevent individuals who are UK resident but non-UK domiciled putting UK company shares into a non-UK company and taking the profits out of the UK tax net.

Property tax

The extension to the lowest tax thresholds of residential stamp duty land tax (SDLT) announced on 23 September 2022 will be reversed from 31 March 2025. From then, the no-tax threshold of the standard residential rates of SDLT and the 3 per cent threshold of the additional residential rates will revert to their previous level of £125,000. In most cases, this will increase the SDLT liability on the purchase of a residential property in England and Northern Ireland by £2,500.
The enhancements to First Time Buyers’ Relief that were introduced at the same time will also now be withdrawn from 31 March 2025. From then, the no-tax threshold for First Time Buyers’ Relief will fall back to £300,000 and the maximum value of the relief will revert to its previous cap of £500,000.
However, there has been no change yet to SDLT multiple dwellings relief or the rates of SDLT which apply to mixed-use transactions, despite the Government having consulted on this.

Businesses

The VAT registration and deregistration threshold of £85,000 will be frozen until 1 April 2026, bringing more businesses within scope of compulsory registration.
The level at which employers National Insurance Contributions (NICs) start to be payable will be frozen at £9,100 until April 2028.
The rate of Diverted Profits Tax (DPT) will be increased from April 2023 to 31 per cent, to ensure it remains 6 per cent above the prevailing rate of UK corporation tax.
The Energy Profits Levy (commonly known as the Windfall Tax on energy companies) will be raised by 10 per cent to 35 per cent.
The government will consult on expanding the range of creative tax reliefs for the film, tv and video game industries.
A range of measures relating to business rates have been introduced to extend support for rates payers by freezing rates multipliers and extending support for retail, hospitality, leisure and certain small businesses.

If you require further information about anything covered in this briefing, please contact Claire Randall, James Bromley or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.