UK Autumn Fiscal Statement – Key Proposals
On November 17, 2022, UK Chancellor of Exchequer Mr. Jeremy Hunt presented the Autumn Statement before the UK Parliament. The aim of the proposals is to promote economic stability and fiscal sustainability. Earlier in September, the Former Exchequer Kwasi Kwarteng, had presented the growth Plan, 2022 but subsequently, due to the significant public backlash over unfunded tax cuts, the former Chancellor and the former Prime Minister Liz Truss were forced to resign. In subsequent developments, many of the proposals from the Growth Plan were rolled back and it was announced that the detailed fiscal plan will be announced in the Autumn Statement.
The following are the key proposals in the Autumn Statement:
Measures relevant for individuals and employers
· The threshold for applying the additional rate of Income tax of 45% will be reduced to GBP 125,140 from GBP 150,000 effective April 2023. The additional tax rate of 45% will be payable on all non-savings and savings income above GBP 125,140.
Tax brackets and rates applicable to employees in England and Northern Island are as folows:
| Tax Rate | Threshold (2022-23) * | Threshold (2023-24) * |
| Basic rate – 20% | Up to GBP 37,700 | Up to GBP 37,700 |
| High rate – 40% | From GBP 37,700 to GBP 150,000 | From GBP 37,700 to GBP 125,140 |
| Additional Rate 45% | Above GBP 150,000 | Above GBP 125,140 |
*Threshold mentioned here are applicable to taxable income after reducing personal allowance which can be up to GBP 12,570. Personal allowance can be more than GBP 12, 570 if a person opts for marriage allowance or blind person allowance and it will be less if income is more than GBP 100,000.
· The Government has decided to freeze the thresholds set for the Income Tax and National Insurance Contribution (NIC) Tax up to April 2028.
· National insurance employment allowance at GBP 5,000 and the secondary threshold at GBP 9,100 will also be maintained until March 31, 2028.
· Dividend allowance will be reduced from GBP 2,000 to GBP 1,000 from April 2023 and then to GBP 500 from April 2024. Dividend allowance represent the amount taxpayer can earn as tax free dividend. The tax-free Capital Gains Annual Exemption will be reduced from GBP 12,300 to GBP 6,000 and then to GBP 3,000 respectively from April 2023 and April 2024. This amount represents the capital gains income limit beyond which taxpayer is liable to pay capital gains tax.
· Effective from April 2023, the National Living Wage (NLW) will be increased to GBP 10.42 from GBP 9.50 per hour to tackle inflation.
· Stamp Duty Land Tax cuts – Government has earlier announced certain cuts in Stamp Duty Land Tax Rates. However, as per Autumn Statement, this measure will be temporary and thus will be effective only up to March 31, 2025.
· From April 2023, the government will adjust the Energy Price Guarantee Scheme in such a way that a typical household in Great Britain will pay GBP 3,000 per annum (up from the current GBP 2,500 per annum) from April 2023 to April 2024.
Measures relevant for businesses
· As per earlier announcements, corporation tax for companies having profits above GBP 250,000 will rise to 25% from April 2023 with lower small profit tax rate applicable to companies having lesser profits. The Autumn statement now announces that the rate of Diverted Profit Tax will increase from 25% to 31% effective from April 2023. The rate of Bank Corporate Tax Surcharge will be 3% from April 2023.
· Effective from April 2023, large multinational groups (with turnover above EUR 750 million) need to maintain the transfer pricing documentations in the form of Master and Local File as per OECD guidelines. This will be legislated in Spring Finance Bill 2023.
· Annual Investment Allowance (AIA) will be allowable up to GBP 1 million on permanent basis from April 1, 2023. This will allow businesses to claim allowance in respect of cost of qualifying plant and machinery acquired during the year up to GBP 1 million.
· Reforms are proposed to Research and Development (R&D) tax relief whereby the following changes will be effective from April 1, 2023. This relief is available for companies which work on innovative projects in science and technology.
- Research and Development Expenditure Credit (RDEC) rate will be increased to 20% from 13%.
- Small and Medium-sized Enterprises (SME) additional deduction will be decreased from 130% to 86%.
- SME credit rate will be decreased to 10% from 14.5%.
· The new rules related to the Global Minimum Corporate Tax of 15% proposed under OECD Base Erosion Profit Shifting (BEPS) project will be implemented effective from the accounting period beginning on or after December 31, 2023. It will require large UK headquartered MNE groups to pay a top-up tax where their foreign operations have an effective tax rate below 15%. Further there would be a supplementary Qualified Domestic Minimum Top-up (QDMTT) whereby large group having operations exclusively in UK will need to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.
· Electric vehicles will start paying excise duty beginning in 2025.
· VAT Registration and De-Registration thresholds will be maintained at GBP 85,000 and GBP 83,000 until April 2026.
· Business rates on properties – Effective April 1, 2023, business rates bills in England will be updated to reflect current property valuation. Further a package of targeted support for next 5 years will be provided for businesses. Further business rate multiplier which is used to calculate business rates based on property valuation will be freezed at current level. Support for eligible retail, hospitality and leisure business would be extended until 2023-24.
Implications:
Employers should note changes in personal income-tax slabs and adjust their payroll policies. Multinational entities having operations in UK should note applicability of Master File and local file documentation requirement from 2023 and monitor developments in this respect. Businesses should take note of change in R&D tax relief, investment allowance availability, changes in business rates and also evaluate eligibility for business rate support package.