Autumn Statement 2022 - Key Points and Reaction

You can read the documents accompanying the Autumn Statement on the gov.uk website by clicking here.

Key tax points in the Autumn Statement include:

Personal taxes

• Income tax: Reducing the threshold for 45p rate from £150K to £125,140. Other IT thresholds frozen until 2028.
• Dividend allowance cut from £2,000 to £1,000 (2023) then £500 (2024)
• CGT allowance down to £6,000 (2023) then £3,000 (2024)
• IHT threshold unchanged to April 2028
• From 2025 electric vehicles no longer exempt from VED. Company car tax rates will remain lower for electric vehicles

Business and indirect taxes 

• Employer NICs threshold frozen until 2028.
• VAT threshold will be frozen till Mar 2026. 
• OECD BEPS project - reforms will be implemented making sure UK gets fair share. Along with anti-avoidance measures this will raise further £2.8bn by 2027-28.
• Windfall tax - rate increasing from 25% to 35%; will continue to March 2028; also new temporary 45% levy on older renewable and nuclear electricity generators - together these will raise £14bn next year
• Business rates - proceed with revaluation but will soften blow with £14bn tax cut / relief scheme.
• R&D credits - Government making SME scheme less generous and large business scheme more generous. They will cut deduction rate for SME scheme to 86% and credit rate to 10% but increase the rate of the separate R&D expenditure credit from 13% to 20%.
• The Government has decided not to introduce an online sales tax. This "reflects concerns raised about an OST’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models."

General

• Taxes will rise as a proportion of national income by just over 1%

CIOT and LITRG reaction (click links to read our press releases)

Moves to rebalance the R&D credits scheme in favour of large businesses prompted CIOT Director of Public Policy John Cullinane to note that while it was important to ensure the scheme delivered value for money, HMRC needed to temper its 'over-zealous' approach to policing qualifying investment to ensure SMEs are able to benefit from the scheme.

Danny Clifford, chair of the Institute's Private Client (UK) Committee warned that the changes announced to the Capital Gains Tax annual exemption and Dividend Allowance would lead to 'hundreds of thousands' more self-assessment claims, possibly as many as 200,000.

On the decision not to proceed with an Online Sales Tax, the chair of CIOT's Indirect Taxes Committee, Gabby Donald, said the measure would have been a 'disproportionate' and 'complex' way of addressing the challenges faced by High Street retailers.

The Autumn Statement revealed that the Government are expecting to raise over £2 billion a year as a result of the G20-OECD proposals for a minimum global rate of corporation tax. CIOT is suggesting the amount likely to be raised could be significantly lower than this, unless other countries choose to implement the proposals in different ways that would not work to their best advantage.

The announcement that the Government will freeze the VAT registration threshold of £85,000 until at least March 2026 will put more pressure on small businesses. CIOT said that the decision means more small businesses will have to register for VAT, while others will be deterred from growing, lest they breach the threshold.

In Scotland, CIOT's Scottish Technical Committee Chair Sean Cockburn noted that many of the personal tax changes announced by the Chancellor would not apply to Scotland, where the power to set rates and bands of non-savings, non-dividend income tax is devolved. CIOT also reflected on the differences that would continue to exist between the income tax regimes of the two nations in lieu of any further Scottish tax changes, and the complexities facing Scots from changes to capital gains tax.

The CIOT's Low Incomes Tax Reform Group (LITRG) expressed concern that increases in the National Living Wage may fuel growth in false self-employment, as some employers try to lower their costs by falsely classifying employees and self-employed in order to avoid additional National Insurance, holiday pay and pension costs. LITRG also said that the low paid self-employed may not see the full value in the government's 10.1% increase in benefits such as Universal Credit due to the minimum income floor used to calculate self-employed benefit entitlements.

ATT reaction

CIOT's sister organisation, the Association of Taxation Technicians (ATT), also reacted to today's events, with ATT Technical Steering Group Chair Senga Prior saying that plans for an online sales tax would have been 'impossible' to keep 'simple' and expressing concern that limiting R&D relief for SMEs would be harmful for the 'smallest and newest' businesses.

Prior also warned that further cuts to HMRC's budget would leave the authority struggling to meet its objective of being a modern and trusted tax authority and that reductions to the GCT annual exempt amount would increase the number of taxpayers in self-assessment, further stretching burdens on taxpayers and the authorities.