Autumn Statement 2022 : Tax Headlines
Chris Romans
EY Private Partner and Midlands Head of Tax - advising ambitious businesses and their owners and helping others succeed.
The Chancellor delivered his Autumn Statement to the House of Commons on 17 November 2022 — a Plan for a Stronger Economy.?He said the Government's three priorities are stability, growth and public services. The ￡55bn package will be funded around half by tax rises and half by spending cuts. There will be a "substantial tax increase", needed to address the cost of living crisis and to "rebuild our economy", however the Chancellor confirmed that the Government still wants to see lower taxes once the economy has recovered.
Energy taxes
·?????????The Energy Profits Levy will increase to 35% (from 25%) from 1 January 2023 to 31 March 2028.?The rate of the investment allowance will reduce from 80% to 29% for all investment expenditure, except for decarbonisation expenditure. The allowance will remain at 80% for decarbonisation expenditure such as installing bespoke wind turbines to power the production installation. The Government states that this will bring the headline tax rate for the sector to 75%. The Government confirms in this?Energy Taxes factsheet?that it will not phase out the levy ahead of its end date of March 2028, giving companies greater certainty to plan investments. The Autumn Statement measures will be included in Autumn Finance Bill 2022, except the changes related to decarbonisation expenditure which will be in the Spring Finance Bill.
·?????????There will also be a levy on low-carbon electricity generators of 45% from 1 January 2023 on exceptional returns, defined as Generation Receipts — (Electricity Generation x ￡75MWh) — Group Allowance (￡10m). The levy will be limited, through a de minimis threshold, to those groups generating more than 100 Gigawatt-hours (GWh) per annum of electricity from in scope generation assets in a qualifying period. The levy will end on 31 March 2028. The?Energy Taxes factsheet?confirms this will replace the Cost Plus Revenue Limit announced in October.?A?Technical Note?on the new levy has also been published, with further information on the operation of the levy. Draft legislation will be published mid-December and the legislation will be included in the Autumn Finance Bill.
Business taxes
·?????????The changes to the bank surcharge which are already legislated to take effect from 1 April 2023 will also go ahead. From that date, banks will be charged an additional 3% rate on their profits above ￡100 million.
·?????????The Autumn Statement also confirms that the rate of Diverted Profits Tax will increase from 25% to 31%, in order to retain a 6 percentage points differential above the main rate of corporation tax.
·?????????The Chancellor confirmed that the Government will implement the proposed Pillar 2 global minimum tax rules from 2024. The draft UK legislation for the Multinational Top-Up Tax (MTUT) was published in July 2002 and has been subject to consultation. The Income Inclusion Rule and Qualified Domestic Minimum Top-up will be legislated for in Spring Finance Bill 2023. The Undertaxed Profits Rule will have effect no earlier than accounting periods beginning on or after 31 December 2024.
·?????????The R&D incentives for SMEs will change. For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. These rate changes will be legislated for in the Autumn Finance Bill 2022.?
·?????????R&D tax reliefs will be subject to reform, as previously indicated by the Government, as part of its plans to encourage and support innovation. These changes will be in the Spring Finance Bill 2023.
·?????????A new consultation has been launched on reforms to audio-visual tax reliefs, which is open until 9 February 2023. Click?here.
·?????????In relation to UK transfer pricing documentation requirements, the Autumn Statement confirms that the new rules will be legislated for in Spring Finance Bill 2023 and HMRC will continue to consult on the Summary Audit Trail.
·?????????The Government has decided not to introduce an Online Sales Tax, and a response to that consultation will be published soon.
Personal and employment taxes
·?????????The threshold for the additional rate of income tax (45%) will reduce to ￡125,140 (from ￡150,000).
·?????????It was also confirmed that the thresholds for the personal allowances, National Insurance contributions and inheritance tax will be frozen until April 2028. The Government will legislate for the income tax measures in Autumn Finance Bill 2022, and NICs changes in affirmative secondary legislation in early 2023.
·?????????The capital gains tax annual exemption will reduce from ￡12,300 to ￡6,000 to April 2023, and to ￡3,000 from April 2024. This will be in the Autumn Finance Bill.
·?????????The dividend tax free allowance of ￡2,000 will reduce to ￡1,000 from April 2023, and to ￡500 from April 2024. This will be in the Autumn Finance Bill.
·?????????The Chancellor confirmed that the employment allowance will remain unchanged at ￡5,000 until March 2026.
·?????????The national living wage will increase to ￡10.42 from April 2023, and national minimum wage rates will also increase.
·?????????Changes are proposed to the capital gains legislation for share-for-share exchanges.?Draft legislation?has been published to provide that non-doms pay UK tax on value built up in shares of a UK close company, even where they are exchanged for shares in an offshore company. The measure deems securities in a non-UK company acquired in exchange for securities in a UK company to be located in the UK for the purpose of capital gains tax. Individuals will pay UK tax on gains or dividend and distribution income received in respect of those securities. The measure will have effect for share exchanges or schemes of reconstruction carried out on or after 17 November 2022. The legislation will be included in the Spring Finance Bill.
Other taxes
·?????????The proposed revaluation of business properties for council tax purposes will go head in March 2023, however the Chancellor announced measures to support businesses, including a new transitional relief scheme. A factsheet is available?here.
·?????????In addition, local authorities in England will have additional flexibility in setting council tax by increasing the referendum limit for increases in council tax to 3% per year from April 2023.
·?????????The SDLT threshold changes introduced in September will remain in place until 31 March 2025, when they will cease.
·?????????Electric vehicles will become subject to vehicle excise duty from 2025. Company car tax rates will be lower for electric vehicles than other vehicles.?
·?????????The Chancellor confirmed that the current VAT registration (￡85,000) and deregistration thresholds (￡83,000) will be maintained for an additional 2 years from 1 April 2024.
·?????????To ease pressure on the costs for UK producers, the Government will remove tariffs on over 100 goods for two years. The measure will remove tariffs as high as 18% on goods ranging from aluminium frames used by UK bicycle manufacturers to ingredients used by UK food producers.
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Further detail
EY UK Budget page on LinkedIn ?LIVE: UK Autumn Statement 2022 | LinkedIn?
Out client webcast will take place on Friday 18 November at 3pm.?Click?here?for further details on how to register.?A replay will be available if clients are unable to attend.
Documents issued
Main documents
Tax specific documents
Other documents