Autumn Statement 2022 Small Business Summary

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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.

Tax update – Autumn Statement 2015

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Summary

The Chancellor, George Osborne, delivered his Spending review and Autumn Statement Speech on 25 November 2015. This article outlines the changes relevant to small-business owners.  The few ‘headlines’ were

  • an extra 3% stamp duty land tax charge on the purchase of additional residential properties from 1 April 2016
  • a requirement to make a payment on account in respect of capital gains tax within 30 days of the disposal of residential properties from April 2019
  • the changes announced to tax credits in Summer Budget 2015 have been abandoned.

More information on the tax proposals scheduled for inclusion in Finance Bill 2016 will be published in the Government’s ‘Overview of Legislation in Draft’ on 9 December.

Making tax digital

As announced at Summer Budget 2015, the government wants to digitise the tax process. The aim is to modernise the tax system and provide a more real-time working basis of individual and business tax affairs, which one would expect, will lead to the advance of tax payments in many cases in due course. Key details so far are:

  • digital tax accounts are to be introduced for all small businesses and individuals by 2016/17
  • by 2020 most businesses, landlords and the self-employed will be required to update HMRC quarterly regarding their tax affairs. The details of how this will work in practice have not yet been decided
  • the intention to consult on ways to simplify tax payments with suggestions of tax payable as profits arise (as announced for capital gains tax arising on the disposal of residential property with payment due 30 days after completion from April 2019).

Employees and pensioners will not be required to update their digital tax accounts quarterly unless they have secondary incomes of more than £10,000 per year.

Simple assessment

The Government is to simplify the tax payment process for taxpayers within the Self-Assessment system where HMRC already holds all the data it needs to calculate the tax liability. Rather than requiring the taxpayer to file a return, instead HMRC will send a legally enforceable payment demand, which the taxpayer can challenge or appeal. This is expected to be introduced from 2016/17.

Residential property

An additional 3% on top of current SDLT rates from 1 April 2016 will be charged on the purchase of additional residential property (e.g. buy to lets and second properties over £40,000), though exclusions to certain corporates and funds are expected.

Dividends for company owners

There was no further commentary with respect to the Summer Budget 2015 announcement regarding the increase in dividend tax rates and the dividend allowance due to apply from April 2016, so the expectation is that these will be introduced in the Finance Bill 2016 as previously announced

Pensions

Further to the announcement at Summer Budget 2015, the Government has now consulted on fundamental changes to pension tax relief. One of the options is that instead of receiving tax relief on the contribution, the savings would work more like an ISA, with a Government top-up and tax-free extraction on retirement.

The Government will provide an update on this at Budget 2016.

Self-Assessment time limits

Draft legislation is to be published ahead of Finance Bill 2016 to clarify that the time allowed for making a self-assessment is four years from the end of the tax year. No further information is included in Autumn Statement documentation but it is possible that this has been prompted by a recent case on tax administration.

Conclusion

There wasn’t a great deal in the Autumn Statement that we didn’t know about, or expect. This article is not a comprehensive review, but concentrated on the issues relevant to small-business owners. If you’d like to know more you can read the government’s documents here.  If you’re concerned that any of the changes mentioned may affect you please get in touch.

Autumn Statement 2014

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The government expects future growth to come from smaller businesses and targeted a significant proportion of the autumn statement towards them.

Small business measures included reducing employment taxes and encouraging apprenticeship schemes for the under 25s, as well as a review of business rates. Pennies

PERSONAL

INCOME TAX

The personal tax allowance will increase to  £10,600 a year from April 2015. The higher rate threshold will rise from £41,865 this year  to £42,385 next year.

ISAs

The annual ISA allowance will increase to £15,240 a year from April 2015. ISA savings that are inherited by a surviving spouse from a deceased partner will retain their tax-free status.

PENSIONS

The 55% tax on unused inherited pension pots will be scrapped. People who die before they are 75 will be able to pass on joint life or guaranteed term annuities tax free.

RESIDENTIAL PROPERTY STAMP DUTY

The way stamp duty is applied to residential properties will change to a marginal rate system. From midnight on 3 December 2014, rates will only apply to the proportion of the property price that falls within each band. The rate will be 0% on the irst £125,000, rising to 12% on prices above £1.5 million.

BUSINESS

BUSINESS RATES

Small business rate relief will be doubled for another year. The inlation-linked increases to business rates will be capped at 2%. There will be a review of the structure of business rates. The business rates discount for certain high street shops will increase by 50% to £1,500.

RESEARCH AND DEVELOPMENT

Research and development tax credit will increase to 230% for small and medium sized businesses and 11% for large firms.

NATIONAL INSURANCE

Businesses will not have to pay national insurance contributions when they hire apprentices who are under 25, up to the upper earnings limit. National insurance contributions for employing anyone under 21 will be abolished from April 2015.

OTHER ANNOUNCEMENTS

TAX AVOIDANCE

A continued crackdown on tax avoidance and evasion will raise at least £5 billion in the next parliament.

VAT REFUNDS

Hospice charities, search and rescue services, and air ambulances will benefit from VAT refunds.

CARERS

Carers will be included in the employment allowance which reduces employer national insurance contributions by up to £2,000.

FUEL DUTY

The freeze on fuel duty will continue.

The government has published the autumn statement documents here, for anyone who would like more information.   The effect of changes on your own tax situation will depend upon your own circumstances. If you would like to discuss how any changes may affect you or your business please get in touch.