Can’t see the wood for the trees?

With so many U-turn’s, Prime Ministers, Chancellors and budget statements in 2022, it’s hard to know where you stand on the plethora of announcements.

Numerous changes were detailed in Jeremy Hunt’s Autumn Statement and with the March budget set to bring even more upheaval, our team have summarised all the key tax announcements below in 1 place, so updates can be tracked easily.

Summary of key tax announcements

Income tax allowances, bands, and rates for individuals

• The basic, higher, and additional rates of income tax will remain at 20%, 40%, and 45% respectively for 2023/24
• The personal allowance will remain frozen at £12,570 for a further two years until 6 April 2028
• The higher rate threshold will remain frozen at £50,270 for a further two years until 6 April 2028 & the additional rate threshold will reduce from £150,000 to £125,140 from 6 April 2023
• The annual dividend allowance will decrease from £2,000 to £1,000 from 6 April 2023 and to £500 from 6 April 2024

Employment income and NIC 

• Class 1A NIC, Class 1B NIC, and employer’s NIC in respect of directors who are subject to an annual earnings period will revert to 13.8% for 2023/24
• Employee’s and employer’s NIC will remain frozen for 2023/24 
• Employee’s and employer’s NIC thresholds will remain frozen for 2023/24 and, are expected to remain at their current levels until 6 April 2028
• Company car tax – the appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2/km will increase by 1% in each of 2025/26, 2026/27, and 2027/28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars  
• The rates for all other vehicles bands will increase by 1% for 2025/26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026/27 and 2027/28  
• From 6 April 2023, car and van fuel benefit charges and van benefit charge will increase in line with CPI 

Self-employed income and NIC 

• Class 2 and 3 NIC rates will increase in line with CPI for 2023/24 
• NIC thresholds will remain frozen for 2023/24 and, are expected to remain at their current levels until 6 April 2028

Capital Gains Tax (CGT)

• The annual exempt amount will reduce from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024 

Inheritance Tax (IHT) 

• The IHT threshold and residence nil rate band will remain frozen at £325,000 and £175,000 respectively until 6 April 2028 

Corporate tax

• Research and Development (R&D) tax reliefs:
  • The Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% for expenditure on or after April 2023
  • The small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10% for expenditure on or after April 2023
  • Previously announced reforms to expand qualifying expenditure to include data and cloud costs, refocus support towards innovation in the UK, and target abuse and improving compliance will go ahead as planned
• The following previously announced measures will go ahead:
  • the headline rate of Corporation Tax will increase to 25% for companies with over £250,000 in profits from 1 April 2023
  • the rate of Diverted Profits Tax will increase from 25% to 31% from 1 April 2023
  • the banking surcharge rate will be reduced to 3% from 1 April 2023 
  • the Annual Investment Allowance (AIA) will be permanently kept at its current level of £1 million
  • from April 2023, large multinational businesses operating in the UK will be required to keep transfer pricing documentation in a prescribed format
• A consultation has been opened on reforms aiming to simplify and modernise the audio-visual subset of the creative industry tax reliefs, covering film, animation, high-end TV, children’s TV and video games
• Large UK headquartered multinational groups to pay a top-up tax where foreign operations have an effective tax rate of less than 15% for accounting periods beginning on or after 31 December 2023

National Living Wage (NLW) and National Minimum Wage (NMW) 

• From 1 April 2023, the NLW for those aged 23 or over will increase from £9.50 per hour to £10.42 per hour, with the NMW increasing to £10.18 per hour for those aged 21 to 22, £7.49 per hour for those aged 18 to 20, £5.28 per hour for those aged 16 to 17, and the apprentice rate will increase to £5.28 per hour

Stamp taxes

• The increased the nil-rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 and increased the nil-rate threshold paid by first-time buyers from £300,000 to £425,000 will now come to an end on 31 March 2025

VAT and indirect taxes

• VAT registration and deregistration thresholds maintained to 2026 which means that the threshold for registration will have been at £85,000 since 1 April 2017
• Vehicle Excise Duty (VED) on Electric Vehicles – From April 2025, electric cars, vans and motorcycles will begin to pay in the same way as petrol and diesel vehicles & likely based on miles per charge
• Tariff suspensions – Import tariffs to be removed 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 
• Climate Change Levy (CCL) rates rebalancing – As previously announced, CCL main rates on gas and electricity in the UK are to be equalised by 2025. In Spring Finance Bill 2023 the CCL main rate on gas will be raised to £0.00775/kWh

Please contact the Dafferns tax team if you have any questions and look out for our March Budget updates.