Less than two months ago, the short-lived premiership of Liz Truss delivered an emergency Budget. But now, with today’s Autumn Statement, that Budget has been largely consigned to the dustbin.
Jeremy Hunt, the new Chancellor, has cleared the slate. And his maiden Autumn Statement stand in stark contrast to the emergency Budget delivered in September. Leading up to his speech, Hunt clearly outlined macroeconomic stability as his prime motive.
The UK economic slowdown is well underway. ONS data shows that debit card spending fell in all sectors (except travel and entertainment) in the week to 13 November 2022. The ONS also found that 25% of businesses reported lower turnover in October than September 2022.
With this backdrop, Hunt’s Budget (which the government insists is not a Budget despite all appearances) has a much more familiar feel. The Budget reverses planned tax cuts, spending pledges reduced and a shake-up of the UK’s tax system. In simple terms, take in more tax, and spend less.
Industry groups warned earlier this year of a business rates “iceberg” in 2023. The rates, which are tied to the Consumer Price Index, were set to rise by up to £3bn due to high inflation.
In his autumn statement, Hunt moved to defuse the rates time bomb. He announced a £13.6bn business rates relief package. The package means thousands of businesses won’t face a sudden spike in April next year.
The relief is temporary, however. The Chancellor has it pencilled in to last for the next five years. For now, however, it means a freeze in rates payments for about 700,000 businesses.
The annual exempt amount for capital gains tax (CGT) is being reduced from £12,300 to £6,000 next year. And then in April 2024, it will be reduced further to £3,000.
The dividend tax allowance follows a similar trajectory. The allowance was lowered from £2,000 to £1,000 next year. Then, in April 2024, it will be lowered even further to £500.
The deduction rate for SME R&D tax relief was cut to 86%. And the credit rate was reduced to 10%. The R&D expenditure credit (RDEC) rate, which usually applies to larger businesses, was raised from 13% to 20%.
The Chancellor pre-empted any criticism that this would harm innovation in his speech. “The OBR have confirmed that these measures have no detrimental impact on the level of R&D investment in the economy,” he said.
The energy profits levy (commonly referred to as a ‘windfall tax’)will be raised from 25% to 35%. The levy has also been extended by two years, until March 2028.
While the Conservatives were initially resistant to a windfall tax, the new Chancellor appears to be an advocate. Hunt has now expanded the levy’s remit.
From January 1, a windfall tax will apply to “low carbon electricity generators”, which includes wind, solar and nuclear generators. The rate will be set at 45%.
Electric vehicles (EVs) were previously exempt from vehicle excise duty (VED). The Chancellor has put an end to this, citing a desire to make the “motor tax system more fair”. EV car owners will pay road tax in Britain from 2025.
Hunt did, however, retain a key incentive for businesses to switch their fleets to electric. Company car tax rates will remain lower for EVs. The current benefit-in-kind (BIK) tax rate for EVs will remain frozen at the lower 2% rate until 2025.
It was somewhat of a footnote in the Chancellor’s speech, but an increase in the NLW will take effect from April 2023. The increase only applies to workers over the age of 23, however.
The NLW will increase from £9.50 an hour to £10.42 an hour from April 2023. In his speech, Hunt said this change would give around 2 million workers a pay rise.
From rising costs to continued economic uncertainty, 2023 has the makings of a turbulent year for businesses. But while the next 12 months will undoubtedly be challenging, there are also exciting opportunities ahead. In this post, we’ll look at the key 2023 business trends that should be at the top of every CFO’s mind. And while […]