Autumn Statement 2022 (again!)
Two autumn statements in as many months but this one looks like it is here to stay. There are number of points mentioned and others that were not mentioned in the statement that I want to draw your attention to. Most of the allowance and rates information is covered in the press.
IR35
After a brief change back to the position as it was in 2016 this was all reversed and the 2021 position remains in place. As a reminder, this means the end client determines the IR35 status. As many contractors are finding, when the end client has any doubts they are playing safe and asking contractors to work either on payroll or through an umbrella company. We have seen more contracts come through as outside IR35 but the big banks and insurance companies are still very wary of committing to outside IR35 decisions.
Corporation tax
In the Finance Act 2021 the Government increased the standard rate of corporation tax to 25%. This is coming in on1 April 2023. The new rules are:
Taxable profits less than £50,000 continue to be taxed at 19%
Taxable profits of more than £250,000 will be taxed at 25%.
Taxable profits falling into the middle, between £50,000 and £250,000 will be taxed at 25% with a marginal rate reduction equal to 3/200.
This is best illustrated using some examples:
- Company A has profits chargeable to corporation tax of £45,000. The company will pay 19% tax of £8,550
- Company B has profits chargeable to corporation tax of £180,000. The company will pay tax of £43,950 (being £180,000 x 25% = £45,000 less marginal rate reduction of £1,050 (£250,000-180,000 x 3/200)
- Company C has profits chargeable to corporation tax of £300,000. The company will pay tax at 25% of £75,000
If your company normally has profits of more than £50,000 you may want to defer expenditure until after 1 April 2023.
Dividend Allowance
This will be reduced from the current £2,000 to £1,000 from 6 April 2023 and down to £500 from April 2024. The rate remains 7.5% on basic rate profits and 32.5% on higher rate profits (as the 1.25% care levy was removed by Liz Truss and has not been re-instated).
Capital gains allowance
This will be reduced from £12,300 to £6,000 from 6 April 2023 and down to £3,000 from April 2024.
Personal Allowance and National Insurance threshold
These all remain unchanged at the current levels for the next few years. This means contractor salaries will remain unchanged for 2023-24 and possibly future years. The Chancellor did not add back the 1.25% care levy so NI rates remain at 12% for employees and 13.8% for employers and 9% for the self-employed
Research and Development tax reliefs
For our few clients that claim R&D tax reliefs the amount of relief is reducing. For expenditure on or after 1 April 2023, the small and medium-sized enterprises additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.
If you have any questions then please contact Clearways Accountants