Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog
From 6 April 2023 this 2022 Autumn Statement reduced the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes to pull more top earners into the 45p tax bracket.
This means that those earning £150,000 or more will pay just over £1,200 more a year. At the same time, the thresholds for base rate and higher rate taxpayers will be frozen until 2028, which will drag more people into higher rates of tax.
There are, however, still plenty of perfectly legitimate ways you can reduce the tax you pay, from investing in (S)EIS, pensions and ISAs or crystallising capital gains liabilities now rather than next year (see below re CGT).
Employer NIC threshold frozen
The Employers’ National Insurance secondary threshold will remain at £9,100 until April 2028.
However, the government said that they expect that 40% of businesses will not be affected as they will be able to offset this freeze by using the £5,000 employment allowance.
Capital gains tax exemption cut to £6k
The current £12,300 tax free allowance for CGT will reduce in 2023-24 to £6,000 and then to £3,000 in 2024-25.
Dividend tax allowance cut to £1k
In another cut of allowances, from 2023-24 the dividend tax allowance will be halved from £2,000 to £1,000 and then halved again to £500 from April 2024.
This is another hit to company shareholders who just recently, from April 2022, have had to pay an additional 1.25% dividend tax rate.
Basic income tax thresholds frozen
Freezing the thresholds at £12,570 and £50,270 means that, as wages rise, more taxes will be collected than if the thresholds were increased. This may impact on wage discussions.
Minimum wage raised to £10.42
For those aged 23 and over the Chancellor has announced an increase in the national minimum wage (NMW) from £9.50 to £10.42.
The national living wage (NLW) rates will increase for those aged 21-22 years old to £10.18 an hour, for 18-20 year olds to £7.49 an hour, and for 16-17 year olds to £5.28.
R&D relief restricted for SMEs
For expenditure on or after 1 April 2023, the small and medium-sized enterprises (SME) additional enhancement deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%. This would change the refund expected for loss making companies from 33.35% currently to 18.6%, which is just under the 19% corporation tax rate anyway and would make companies consider their options whether to surrender the R&D loss or not.
For larger companies, the research and development expenditure credit (RDEC) rate will increase from 13% to 20%.
Electric vehicles will be taxed
The government plans to tax electric vehicles to pay road tax in the same way as petrol and diesel vehicles from April 2025 to equalise the road vehicle excise duty with petrol and diesel vehicles
P11d and Company car tax (CCT) rates will be frozen until April 2028 to give certainty to businesses and employees.
Diverted profits tax increases to 31%
In order to ensure that it remains an effective deterrent against diverting profits out of the UK, from April 2023, the rate of diverted profits tax will increase from 25% to 31%, in order to retain a 6% points differential above the main rate of corporation tax.
Minimum global tax rate goes ahead
The government has confirmed that from 2024 it will introduce the OECD Pillar 2 rules global minimum corporate tax rate for multinationals of 15%.
Windfall taxes rise to 45%
From 1 January 2023, the rate of the energy profits levy will be increased to 35% from 25% to ensure oil and gas companies benefiting from increased profits will pay more in tax. In addition to this, a new and temporary tax of 45% will be charged on the profits of electricity generators which, like the oil and gas sector, have seen profits increase.
The energy profits levy was introduced in May 2022 to help fund more cost-of-living support. This is expected to raise over £14bn between 2023 and 2028 and will help pay for the more than £55bn of support being provided for household and business energy bills.
Energy support extended by a year
From April 2023, the energy price guarantee (EPG) will rise to £3,000 a year for the typical household, up from £2,500 and will be extended for 12 months. This means that households receive an average of £500 in support between 2023-24.
Further support was increased for the most vulnerable households, with further cost of living payments of £900 provided to households on means-tested benefits. This includes an additional £300 to pensioner households and £150 to people on disability benefits including Personal Independence Payment.