Our analysis of the announcements in the Autumn Statement has been published here.
In this Autumn Statement, the government made no secret of the fact that it has “reversed nearly all of the measures in the Growth Plan 2022,” i.e. September’s ill-fated mini-Budget.
In his speech, Jeremy Hunt went straight to the point, announcing a tax increase for those on higher incomes by reducing the Additional Rate Income Tax threshold from £150,000 to £125,140, chosen to align with the top end of the band where the personal allowance has tapered to zero.
The use of tax banding to increase tax revenues was a general theme, with the Dividend Allowance being reduced from £2,000 to £1,000 in 2023/24 and £500 thereafter, and the Capital Gains Exempt Amount falling from £12,300, to £6,000 in 2023/24 and £3,000 thereafter. The VAT registration threshold is also fixed at £85,000 until 2026. Other bands and thresholds, including the IHT nil rate, are fixed for up to 6 years, so inflation will drive revenues upwards.
There were some surprises for Small and Medium Enterprises using Research & Development (R&D) tax credits, with the additional deduction for qualifying costs decreasing from 130% to 86% from 1 April 2023. With the increase in Corporation Tax rates from 19% to 25%, for tax paying companies, the value of the relief is fairly similar. The biggest impact is for loss making companies looking to secure a cash back, as the cash-back rate is cut to 10% from 14.5%. The combined impact is the value of the relief falls from 33p in the pound of R&D spend to 18.6p. There is no question that this is a policy intent. The government is conscious of a growth in erroneous and fraudulent R&D claims, particularly for companies seeking a cash repayment. These new measures are described as helping “to support fiscal sustainability by raising revenue and reducing fraud and error, without materially changing the levels of R&D expenditure over the forecast period.”
One of the few measures retained from the mini-Budget was the increase in the nil rate threshold of Stamp Duty Land Tax (SDLT) from £125,000 to £250,000 for all purchasers of residential property in England and Northern Ireland. The increase in the nil-rate threshold for first-time buyers from £300,000 to £425,000 also survived. The maximum purchase price for which First Time Buyers’ Relief can be claimed was increased from £500,000 to £625,000. This will now be a temporary SDLT reduction until 31 March 2025.
Making the Annual Investment Allowance permanent, and at a level of £1,000,000 annually from 1 April 2023, is another mini-Budget survivor.
There has been much talk of further so-called windfall taxes, and an increase from 25% to 35% was announced in Energy Profits Levy, as well as the introduction of the Electricity Generator Levy at a rate of 45%. Both measures, applying from 1 January 2023 on extraordinary profits, together are expected to raise sums in the tens of billions.
A policy change, but with an impact some years ahead, is the decision to make electric vehicles subject to Vehicle Excise Duty from April 2025. Driving an electric vehicle will no longer qualify for this tax break.
In terms of spending pledges, government positioning is towards energy independence, efficiency, infrastructure and innovation. The announcements included new nuclear power plant, Sizewell C, confirmation of previous pledges, including East West Rail and High Speed 2 to Manchester, and various further consultations and reviews in terms of government departmental budgets. There will be more devolution in England so more funds controlled and deployed locally.
For further details, see our analysis here.