The Autumn Statement 2022 contained a number of tax increases for small business, landlords and employees. Below is a summary of relevant changes.
National Living and Minimum Wage
The national and living wage will increase from April 2023
| Age range | Current hourly rate | From April 2023 |
| 23 and over | £9.50 | £10.42 |
| 21 – 22 | £9.18 | £10.18 |
| 18 – 20 | £6.83 | £7.49 |
| 16 – 17 | £4.81 | £5.28 |
Tax on dividends
From April 2023 the current 0% tax dividend allowance will be halved to £1,000. This will result in additional income tax of £88 for a basic rate taxpayer, £338 more for a higher rate taxpayer and £394 more for an additional rate taxpayer.
In April 2024 it will be reduced again to £500.
Business owners with the flexibility of paying a salary/dividend mix may want to re-assess whether their strategy is still the optimum remuneration method for them.
Income Tax and NIC thresholds
The personal tax allowance has been frozen at £12,570 until April 2028. The higher rate tax threshold will remain at £50,270. Usually these thresholds increase to keep pace with inflation. Freezing the thresholds will mean most people paying more tax over the next few years. Assuming inflation of 2% per year, someone with a salary of £25K will pay around £580 more in 2027/28, while someone earning £62K will pay about £2,940 more.
The additional rate of tax, 45%, will be payable on income above £125,140 from April 2023. The threshold is currently £150K.
National Insurance
The employer’s threshold will remain at £9,100. Employer’s (secondary) NI contributions will be due at £13.8% of employee’s earnings above that level. However, the employer’s allowance remains in place, so many employers will not need to pay the first £5,000 of secondary contributions.
Class 2 NIC, paid by self-employed people, will increase to £3.45 per week.
Capital Allowance Reduction
The tax-free capital allowance will reduce from £12,300 to £6,000 in April 2023, then become £3,000 in April 2024. This is significant for property owners planning to sell properties that are not their main residence. It will increase tax liabilities by up to £1,764 in 2023/24 and £2,604 in 2024/25.
Corporation tax
Corporation tax will remain at 19% for companies with taxable profits below £50K. Those with profits between £50K and £250K will pay 25%, with marginal rate relief. Marginal rate relief provides a gradual increase in the rate of corporation tax as profits increase from £50K until the main rate of 25% is payable once profits reach £250K.
R&D tax relief
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%. This is quite a significant change and means considerably less tax relief will be available for small companies.
Business rate relief
For the smallest businesses affected by reductions or changes in eligibility to small business rate relief or rural rate relief, the increase to their bills will be capped at £600 per year from 1st April 2023.
More information…
You can read the full Autumn Statement on the Treasury website.
Revising your forecasts and business plans for April 2023 would be a good idea. If you would like any assistance please get in touch.
