On Thursday 17 November, the Chancellor presented the Autumn Statement. The Chancellor outlined three priorities of stability, growth and public services.
A summary of the key announcements is set out below.
Corporation tax - The Government previously announced that the rate of corporation tax will increase from April 2023 to 25% from the current 19%.
Banking Corporation Tax Surcharge - As a result of the increase to 25% in the Corporation Tax rate, from April 2023, the Bank Corporation Tax Surcharge will reduce from 8% to 3% This applies to banks’ profits above £100 million.
Energy Profits Levy (EPL) and Investment Allowance - From 1 January 2023, the EPL rate will rise by 10 percentage points to 35%. The investment allowance will be reduced to 29% for all investment expenditure (other than decarbonisation expenditure).
Electricity Generator Levy (EGL) - A new EGL levy at a temporary rate of 45% will be levied on extraordinary returns from low-carbon UK electricity generation. The levy will apply to extraordinary returns arising from 1 January 2023.
Reforms to Research and Development (R&D) tax reliefs - For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, 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%. A consultation will be launched on the design of a single R&D scheme. The Government will introduce legislation (which was published in draft earlier this year) to reform R&D tax reliefs by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targeting abuse and improving compliance.
Consultation on reforming the audio-visual creative reliefs - A consultation will be launched to incentivise the production of culturally British content and support the growth of the audio-visual sector.
Investment zones - The government will refocus the investment zones programme to a limited number of the highest potential knowledge-intensive growth clusters. Work is being undertaken to identify these clusters and will be announced in the coming months.
First Year Allowance (FYA) for Electric Vehicle Chargepoints - the FYA for electric vehicle chargepoints will be extended to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.
Diverted Profits Tax – From April 2023, the rate of Diverted Profits Tax will increase from 25% to 31%.
OECD Pillar 2 -The government will implement the OECD Pillar 2 rules for a global minimum corporate tax rate, for accounting periods beginning on or after 31 December 2023. It will:
- introduce an Income Inclusion Rule (IIR) which will require large UK headquartered multinational groups to pay a top-up tax where their foreign operations have an effective tax rate of less than 15%
- Introduce a supplementary Qualified Domestic Minimum Top-up (QDMTT) tax rule which will require large groups, including those operating exclusively in the UK, to pay a top-up tax where their UK operations have an effective tax rate of less than 15%
The government intends to implement the backstop Undertaxed Profits Rule in the UK, but with effect no earlier than accounting periods beginning on or after 31 December 2024.
Transfer pricing documentation: Master File / Local File - From April 2023, large multinational businesses operating in the UK will be required to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD’s Transfer Pricing Guidelines (Master File and Local File). HMRC will continue to consult on a Summary Audit Trail.
National living wage (NLW) - the NLW will increase for individuals aged 23 and over from 9.7% to £10.42 an hour from 1 April 2023. Lower rates apply to people aged below 23 and apprentices.
National Insurance contributions Secondary Threshold - the Class 1 Secondary NICs (the Secondary Threshold) will be fixed at £9,100 from April 2023 until April 2028.
Additional Compliance Resource for HMRC - The government is investing a further £79 million over the next 5 years to enable HMRC to allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers. This investment is forecast to bring in £725 million of additional tax revenues over the next 5 years.
Income tax thresholds - The personal allowance will remain frozen at £12,570, and the threshold at which individuals become liable for the higher rate of 40% will remain at £50,270, in both cases until April 2028.
Additional rate of income tax (ART) - the 45% ART threshold will be lowered from £150,000 to £125,140 from 6 April 2023.
National insurance thresholds - the main thresholds will remain frozen until April 2028
Inheritance Tax nil rate bands - these will remain frozen until April 2028. The nil-rate band is frozen at £325,000, the residence nil-rate at £175,000, and the residence nil-rate band taper will continue to start at £2 million.
Dividend Allowance - the dividend allowance will be cut from £2,000 to £1,000 from April 2023, with a further reduction to £500 from April 2024.
Capital gains annual exempt amount - the exempt amount will be reduced from £12,300 to £6,000 from April 2023, further reducing from April 2024 to £3,000.
Capital Gains Tax Share Exchange - Anti-avoidance legislation has been introduced, which will prevent non-UK domiciled individuals from claiming the remittance basis in respect of dividends and gains arising from certain non-UK companies where there has been a share-for-share exchange from 17 November 2022 involving a UK company.
Stamp Duty Land Tax (SDLT) - the increases to the SDLT nil-rate threshold (from £125,000 to £250,000) and the increased nil-rate threshold paid by first-time buyers from £300,000 to £425,000, which came into force on 23 September 2022, remain only until March 2025. After this date the allowances will revert to their previous levels.
Business rates package - From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support will be available including:
- Multiplier Freeze - The business rates multipliers will be frozen in 2023-24 at 49.9 pence and 51.2 pence.
- Transitional Relief Scheme - Upwards Transitional Relief will support properties by capping bill increases caused by changes in rateable values at the 2023 revaluation.
- Retail, Hospitality and Leisure Relief - Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24.
- Supporting Small Business Scheme (SSBS) - Bill increases for the smallest businesses losing eligibility or seeing reductions in SBRR or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023.
- Improvement Relief - a new improvement relief (previously announced at Autumn Budget 2021) will now be introduced from April 2024.
Indirect taxes & Duties
VAT registration and deregistration thresholds - the thresholds will be frozen at their current levels of £85,000 until April 2026.
Vehicle Excise Duty on Electric Vehicles (VED) - From April 2025, electric cars, vans and motorcycles will pay VED in the same way as petrol and diesel vehicles.
Online Sales Tax (OST) - the government has decided not to introduce an OST. A response to the OST consultation will be published shortly.
Import tariff suspension - Import tariffs will be removed on over 100 goods for two years.