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Inflation figures in the UK, realised last Tuesday, are at the highest rate in over 40 years. What did chancellor Jeremy Hunt announce yesterday and how does it affect your trade business? A summary of the key announcements is set out below:
Autumn Statement 2022 for businesses: key announcements at a glance
Corporation Tax and Dividend Tax
If you have a limited liability company then corporation tax and dividend tax changes may impact you.
The rate of corporation tax will increase from April 2023 to 25% from the current 19%, as previously announced. Fortunately this will only impact you and if you have profits of more than £50,000.
From April 2023 if you have profits of less than £50,000 or less you will continue to pay 19% and from £50,001 to £250,000 you will pay tax at the new main rate of 25% reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate as your profits rise higher. Profits above £250,000 will be taxed at a straight 25%.
From April 2023, the rates of taxation on dividend income will be: ordinary rate - 8.75%; upper rate - 33.75%; additional rate - 39.35%.
Corporation tax due on directors' overdrawn loan accounts is paid at the dividend upper rate, so will also remain at 33.75%.
At the same time, the dividend tax free allowance is reducing from £2,000 to £1,000 and in April 2024 to £500.
National Living Wage (NLW)
If you have employees, this is important. The National living wage will increase for individuals aged 23 and over from £9.70 to £10.42 an hour from 1 April 2023. For people aged below 23 and apprentices lower rates will apply as follows:
- 21-22 year olds £10.18 an hour
- 18-20 year olds £7.49 an hour
- 16-17 year olds £5.28 an hour
- Apprentices £5.28 an hour
Van Benefit Charge and Car and Van Fuel Benefit Charges
These will increase in line with the Consumer Price Index (CPI) from April 2023.
VAT threshold is now frozen at £85,000 until 2026. The threshold won’t increase in line with inflation. This means that if your business earns more as a result of rising prices, you’ll then have to register to pay VAT.
The additional income tax threshold will be reduced from £150,000 to £125,140 from April 2023. This means that more self-employed could become additional rate taxpayers.
Here is the government’s complete Autumn Statement 2022 document for more information.
Do you have any questions about the announcements made in the Autumn Statement? Leave us a comment below.