2 minute read | November.18.2022
On 17 November 2022, the UK Government announced a number of significant tax measures in its Autumn Statement.
There were no real surprises this time as many of the measures had been trailed in recent days. The tax changes themselves are less dramatic than those announced in the Mini-Budget, with no changes to the headline corporation tax, income tax or CGT rates, albeit the CGT annual exempt amount and the income tax dividend allowance are to be reduced and the income tax 45% additional rate threshold is to be reduced by nearly £25k.
One of the major, but not unexpected, announcements was the increase in the rate of the recently introduced energy profits levy from 25% to 35% on the profits of oil and gas companies operating in the UK and the UK Continental Shelf, with a modified form of the investment allowance remaining. These changes are accompanied by the introduction of the new 45% electricity generator levy.
While the reduction in R&D SME relief is likely to disappoint early-stage companies, this reduction combined with the increase in the R&D expenditure credit (“RDEC”) would seem to incentive faster growth, and the commitment to simply the R&D relief regime is also encouraging.
Here are some key highlights, of particular relevance to our practice:
1. Income Tax: (i) the reduction of the 45% additional rate threshold from £150,000 to £125,140 from April 2023, and (ii) a freeze in the personal tax thresholds (until April 2028).
2. Dividend allowance: the current £2,000 dividend allowance for individuals is to be decreased to £1,000 from April 2023, then further decreased to £500 from April 2024.
3. National Insurance Contributions: a freeze in the NICs thresholds until April 2028.
4. Stamp Duty Land Tax: the previous Chancellor’s announcement relating to the increase in the nil-rate threshold for residential property from £125k to £250k (and from £300k to £425k for first time buyers) is to remain in place until 31 March 2025, after which there is a proposed “sunset clause”.
5. Windfall tax: (i) energy profits levy to be increased from 25% to 35% from 1 January 2023 until March 2028, and (ii) a temporary 45% electricity generator levy is to be introduced from 1 January 2023.
6. Capital Gains Tax: the CGT annual exempt amount is to be reduced from £12,300 to £6,000 from April 2023, and further reduced to £3,000 from April 2024.
7. Research & Development (R&D) Tax Credits: (i) the 13% RDEC is to be increased to 20%, and (ii) the SME R&D relief deduction rate is to be decreased from 130% to 86%, and the SME tax credit from 14.5% to 10%.