The UK Government’s Chancellor, Jeremy Hunt, has set out in his Autumn Statement measures that he views will bring under control inflation and growth of the economy. He described the measures a method to make the downturn caused by inflation “shallower”. The Chancellor says that the UK economy is in recession, despite the fact that it is likely to grow overall this year.
Some of the tax and spending measures set out in the Statement are as follows:
Income Tax and Employees’ National Insurance Contributions
Some income tax powers are devolved, so the main rates and thresholds in Scotland may change when the Scottish Government’s Finance Secretary releases his budget on 15 December for the year 2023/24.
The measures announced that will apply to Scotland are as follows:
- The Personal Allowance – the amount that an individual can earn before paying income tax – will remain at £12,570. This will remain frozen until 2028.
- The rates and thresholds of National Insurance will remain frozen until 2028 at 12% of earnings between £12,570 and £50,271 per year, and at 2% above this threshold.
- The Dividend Allowance – the amount that a person can earn in dividend income before paying income tax – will be reduced from £2,000 to £1,000 in 2023-24 and £500 in 2024-25. This will make it more expensive to take profits from your limited company as dividends.
- The increases in company car benefit-in-kind tax bands will be limited to 1% per year.
In England, Wales and Northern Ireland, the Chancellor has announced that the threshold for the top rate of income tax (the 45p rate) will reduce from £150,000 to £125,140, meaning that high earners in the rest of the UK will pay more tax. It remains to be seen if the Scottish Government will implement a similar policy.
The National Living Wage – to be paid to all over-23s in the UK will rise from £9.50 per hour to £10.42 per hour. For a worker on minimum wage, this will be an increase of around £1,600 according to the Chancellor.
The rise to Corporation Tax will go ahead, with the rate expected to rise from 19% to 25% on 1 April 2023. The Chancellor also announced windfall taxes for Oil and Gas Firms as well as electricity generators.
Road Tax and Electric Vehicles
Electric Vehicle (EV) drivers currently do not pay road tax. The Chancellor announced that from 2025, road tax will be payable on electric vehicles. Electric Vehicles will also not be exempt from Vehicle Excise Duty from 2025.
Employers’ National Insurance Contributions (ERNICs)
Employers pay ERNICs on employee’s salaries at 13.8% from 6 November 2022. This allowance will be frozen until 2028.
The Employment Allowance, which provides employers with a reduction of up to £5,000 towards their ERNICs bill will be maintained. This means that many small businesses will pay no ERNICs at all.
There were no major changes to VAT in this statement. The VAT threshold – the turnover figure at which a business must register for VAT – was expected to be reduced. This will not go ahead and will be maintained at £85,000 until 31 March 2026.
Capital Gains Tax
The rates of Capital Gains Tax (CGT) will remain as before, but the annual exempt amount – the total gains that an individual can make before paying CGT will be reduced from £12,300 to £6,000 in 2023-24 and £3,000 in the following year.
Pensions and Benefits
The Chancellor announced that the pensions “triple lock” will remain – the policy that the state pension will rise by the higher of inflation, the average increase in wages or 2.5%. This means that the state pension will rise by 10.1%.
Most state benefits will also rise by 10.1% from next April.
Talking Numbers Accountancy and Bookkeeping can help you to understand what this means for you. Tax doesn’t need to be taxing – we can help you understand your numbers and ensure that you are taking advantage of all available reliefs and allowances. Get in touch today for a free, no-obligation consultation.