The UK economy has been negatively impacted due to a combination of factors such as the Ukraine-Russia War and the pandemic. With almost £30 billion in spending cuts and nearly £24 billion in tax rises, there were many changes announced in an attempt to recover from economic challenges the UK faces. These are likely to have a big effect on small businesses. In this article, we will be highlighting the changes announced in the UK’s Autumn budget.
WHEN WAS THE AUTUMN BUDGET ANNOUNCED?
The UK Autumn budget was announced on the 17th of November 2022 by The Chancellor of the Exchequer, Jeremey Hunt. He was appointed Chancellor of the Exchequer on 14 October 2022. The Autumn budget will have an impact on small businesses. Below we have highlighted key changes and how they may affect small business owners.
CUTTING THE ADDITIONAL TAX RATE THRESHOLD
Currently, the additional tax rate threshold is set to £150,000. The proposed budget has introduced changes to the additional tax threshold. From April 2023, people will be paying income tax at 45% for anyone earning more than £125,140.
CUTTING THE DIVIDEND ALLOWANCE
The chancellor has also announced that there will be cuts to the dividend allowance. The dividend allowance is currently £2000 but it will be reduced to £1000 next year. From April 2024, it will be reduced further to just £500.
INCREASES TO THE NATIONAL LIVING WAGE
The national living wage will see an increase of 9.7%. This is equal to an hourly rate of £10.42 and will come into effect in April 2023.
ELECTRIC VEHICLES ARE NO LONGER EXEMPT FROM VEHICLE EXCISE DUTY
Electric vehicles are currently exempt from vehicle excise duty. Jeremy Hunt announced that this will no longer be the case. He did not give details as to the cost of this, however, he did advise that it will still be lower than petrol or diesel vehicles. In addition to this, the £5.000 electric vehicle incentive will be scrapped.
CUTTING CAPITAL GAINS ANNUAL EXEMPT AMOUNT
Capital gains exempt amount will be reduced from £12,300 to £6000 from April 2023. This is also set to further reduce to £3000 in April 2024. Landlords who are planning to sell a property may consider completing before 5th April 2023 in order to save on capital gains tax.
INCREASES TO CORPORATION TAX
Corporation tax is set to increase to 25% in April 2023. This is an increase from 19%, however, small businesses that have a profit of less than £50,000 will still be paying 19%.
NO CHANGE TO THE VAT THRESHOLD
There are no planned changes to the VAT registration threshold for businesses. It has been confirmed that this will remain constant until 2026. It is estimated that no change to the VAT threshold will force hundreds of small businesses to register for VAT. This is due to increased inflation-led sale prices.
PERSONAL ALLOWANCE FROZEN UNTIL 2028
The income tax personal allowance of £12,570 was frozen until 2026, however, this has been extended to 2028. This could expose the lower paid to income tax as wages increase.
ADDRESSING BUSINESS RATES
It was announced that business rate valuations will be updated. This is to reflect the current property since the last property valuation in 2017. Furthermore, there will be tax reliefs for different sectors such as retail, leisure and hospitality. In addition to this, there will be some relief available for small businesses.
THERE WILL BE A REDUCTION IN R&D TAX RELIEF
The Chancellor of the Exchequer has announced that there will be a reduction in research and development tax relief. The deduction rate is set to be reduced to 86% whilst the credit rate will be reduced to 10%. In addition to this, the rate of separate R&D expenditure credit will increase to 20% from 13%.
The points outlined above should be taken into consideration if you have a small business or are planning on starting one. If you need advice on tax, get in contact with us at All Numbers. We are an accountancy firm with a wealth of experience. At All Numbers, we handle the numbers so that you can focus on the things that matter. If you found this article helpful, please take the time to share it on your social channels.
