UK Chancellor Jeremy Hunt has delivered his Autumn Statement to MPs, which outlines his plans for stabilising the economy and reducing inflation through spending cuts and tax rises worth billions of pounds.
The Autumn Statement is an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR). In his statement, the chancellor acknowledged that the UK is already in a recession, with the OBR predicting the economy to grow by 4.2% this year but shrink by 1.4% in 2023.
The Autumn Statement defines the government’s plans to help rebuild the economy, reduce debt, and restore the UK’s credibility with international markets. But how does this updated budget affect UK businesses?
In this blog we highlight the main points from the Autumn Statement which affect UK businesses, with analysis from Christine Lawless, one of our experts in the AVASK Accounting department.
- The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140
- Income tax personal allowance, higher rate thresholds, main National Insurance thresholds and the inheritance tax thresholds with be frozen until April 2028
- Tax-free allowances for dividend and capital gains tax will be cut next year and in 2024. Dividends tax free allowance will be cut from £2,000 to £1,000 next year and to £500 the year after. Capital gains tax annual exempt amount will be cut from £12,300 to £6,000 next year and to £3,000 the year after
- From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance and will be maintained at this level from April 2023
The above changes will impact Directors and Shareholders of a business the most. Whilst taxes are due to increase over the coming years, the pre-warning allows businesses the opportunity to start planning now. There are still plenty ways a business can reduce the tax they pay, for example, crystallising capital gains liabilities now rather than next year.
Cost of living support
- The pensions “triple lock” will be kept, and they will rise, like benefits, in line with September’s inflation rate of 10.1%.
- The National Living Wage will be increased by 9.7% from April next year – from £9.50 an hour to £10.42 for over-23s. The annual pay rise will be worth over £1,600 to a full-time worker
- Universal Credit will rise in line with September’s inflation figure of 10.1% from next April. Universal Credit will benefit next year by around £600.
- A household using a typical amount of gas and electricity will pay £3,000 annually, up from £2,500, as the Energy Price Guarantee rises. The scheme will run for 12 months from April.
- Additional payments of £900 will be paid to those on means-tested benefits, £300 to pensioner households and £150 to people on disability benefits.
Whilst the increase in wages is in general a positive thing, it will be something businesses with employees will need to bear in mind as an increase to their expenditure. The increase to the Energy Price Cap Guarantee may also encourage businesses to review their current overheads.
- Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025
- Company car tax rates would remain lower for electric cars
According to the government, this change will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate. However, since the change doesn’t come in until 2025, UK businesses can still benefit until that point.
If you have any questions, please contact AVASK today. You can also telephone us on:
+44 (0)23 8060 0120 or email: firstname.lastname@example.org.