2022 Autumn Budget - Headline Announcements

A ‘Balanced Plan to Stability’ – Autumn Budget 2022 

Jeremy Hunt confirmed today that the UK is now in recession. As growth slows and unemployment rises, the measures aim to make the recession shallower and reduce unemployment. As growth returns, the Chancellor plans to reduce national borrowing. 

To achieve these targets, the Chancellor explained there will be ‘substantial tax increases’.

Income Tax

The Chancellor announced the following measures:

• Income tax thresholds will be frozen for a further two years, on top of an existing four-year freeze, to April 2028. This means the personal allowance will remain at £12,570 and the basic rate band threshold will remain at £37,700.
• Dividend allowances will be cut from the current allowance of £2,000 to £1,000 from April 2023 and then to £500 from April 2024.
• The threshold for the 45p additional rate of tax will be cut from £150,000 to £125,140 from 6 April 2023.

Capital Gains Tax

As part of the substantial tax increases, the Chancellor announced the annual allowance for capital gains tax will reduce from £12,300 to £6,000 from April 2023 and then to £3,000 from April 2024. 

Windfall Taxes

The Energy Profits Levy, a windfall tax placed on businesses in the energy sector that make extraordinary profits, will increase from 35% to 45% and will be extended to the end of March 2028. A new temporary Electricity Generator Levy of 45% will also be introduced and will be levied on extraordinary returns from low-carbon UK electricity generation. 

Stamp Duty Land Tax

Stamp Duty cuts announced in the growth plan in September 2022 will remain in place, but it will only be available until 31 March 2025. This means that the minimum cost of a property on which homebuyers pay stamp duty in England and Northern Ireland remains at £250,000 and £425,000 for first-time buyers until 31 March 2025.

Inheritance Tax

The Inheritance Tax (IHT) nil-rate bands were previously frozen at current levels until 5 April 2026, and it has now been announced that they will stay fixed at these levels for a further 2 years until 5 April 2028. 

The IHT nil-rate band (NRB) will continue to be £325,000 and the residence nil-rate band (RNRB) will continue to be £175,000 with the RNRB taper threshold remaining at £2 million. At these levels, qualifying estates will continue to be able to pass on up to £500,000 tax-free and the qualifying estate of a person’s surviving spouse or civil partner can continue to pass on up to £1 million tax-free where the estate of the spouse or civil partner who died first has not already used up those available bands upon their death. 

VAT

Having compared Great Britain’s VAT registration threshold to those much lower thresholds across Europe, the Chancellor has decided to maintain the current VAT threshold of £85,000 for a further two years from April 2024.  The VAT deregistration threshold will also remain at the same level of £83,000 until March 2026.

Vehicle Exercise Duty

The exemption on electric vehicles Vehicle Exercise Duty will end by April 2025.

Research & Development

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%.  The after-tax benefit increases from 10.5% to 15% for a company paying tax at 25% and to 16.2% at the 19% corporation tax rate.

For SMEs, the additional deduction will decrease from 130% to 86%, and the SME repayable credit rate will decrease from 14.5% to 10%. This represents a reduction in the rate of the benefit from 24.7% to 16.3% for SMEs paying corporation tax at 19% and 21.5% for those at the higher 25% rate.  

Previously announced changes including expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK and targeting abuse, and improving compliance will go ahead.