On November 17th, Chancellor Jeremy Hunt delivered the Autumn Statement 2022. This statement outlined the government's plans, largely focused on economical growth, for the economy in 2023 and included some key points that are relevant to small business owners. In this blog post, we will highlight some of the most important announcements for small businesses, business and personal tax, VAT, income tax, and payroll, and provide our thoughts on how they could impact your business. We hope you find this information useful and informative. Thank you for reading!
Autumn Budget 2022 is all about rising, falling, and getting back up again. From unemployment rates to GDP, you'll witness highly fluctuating statements. So, get ready to re-reading percentages again and again.
Inflation, Unemployment Rate, and Economic Growth
- UK inflation rate is 9.1% this year and 7.4% next year, according to the Office for Budget Responsibility (OBR).
- The OBR also judge that the UK is now in recession. The Chancellor warned beforehand there would be “difficult decisions” due to inflation and the cost of living crisis.
- Overall, this year the economy is still forecast to rise by 4.2%autumn statement, but GDP then falls in 2023 by 1.4% before rising by 1.3% then 2.6%, and 2.7% in the following three years.
While inflation has been high, the Bank of England has kept interest rates at 0.75%, where they have been since August last year, to try to support the economy during the pandemic crisis. However, some economists have suggested that rates may need to start rising sooner than previously thought to keep inflation under control as the economy recovers from the pandemic shock.
The unemployment rate is expected to rise from 3.6% to 4.9% in 2024 and then fall to 4.1%. The job market will be busy next year.
- Borrowing in the 2022/2023 financial year will be 7.1% of GDP or £177 billion
- The chancellor adds borrowing will be halved in the next 5 years, thanks to the autumn statement 2022.
- Hunt also announced that the 45p rate of tax will be reduced to £125,140, which was previously above the threshold of £150,000 for high earners. In other words, anyone earning between £125,10 and £150,000 will have to pay 5% more tax.
- Income Tax personal allowance, main National Insurance thresholds, and Inheritance Tax will stay frozen until April 2028.
Dividend allowance for directors and shareholders in a company and exempt amount of capital gains tax for property owners are to face a gradual decrease over 2 years.
The dividend allowance will be gradually cut from £2000 to £1000 next year, then to £500 from April 2024. This means more investors have to file a self-assessment tax return each year.
Capital Gains Tax
You`ll be exempt from capital gains tax from the threshold of £12,300 to £6000 next year then £3000 from April 2024. The decision has been made largely to contribute to the treasury. Buy-to-let owners may want to consider a different business model like limited companies, considering CGT is halved.
The company car tax rate will remain lower for electric vehicles, and the limit increases to 1% per year for 3 years.
The employment allowance will remain as £5000, in other words, 40% of the businesses won't pay any national insurance contributions.
Research and Development Scheme
SMEs deduction rate is now reduced to 86% from 130% and the tax credit rate lowered to 10 % from 14.5%. But increase the separate rate of R&D expenditure credit from 13% to 20%. This should have no detrimental impact on the R&D investments.
Mr. Jeremy Hunt`s autumn statement was finally released and it brings the changes we lined up above. The statement covers a broad area of economic statements ranging from unemployment to business tax and growth. We will have to wait and see how these changes play out in the coming months but stay tuned with us for all the latest updates.