The Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement on 17 November 2022. The £30bn cost of his predecessor's catastrophic ‘mini budget’ hung heavily over this financial statement. Mr Hunt’s job was to reinstate confidence in the Government’s fiscal capabilities and to inject some optimism into the global perception of the UK economy. To do this, he needed to deliver a clear strategy for economic success.
The elephant in the room, though, is the current challenging economic outlook for the UK.
According to the Financial Times, the latest figures from the Office for Budget Responsibility (OBR) show that:
Gross domestic product is set to contract by 1.4% in 2023
The UK economy is already in a recession that will last more than a year
Output is set to recover to pre-pandemic levels only in the last quarter of 2024.
The Autumn Statement focused on ‘stability, growth and public services’. On the whole, big business and the City have cautiously welcomed the key announcements.
But, has the Chancellor done enough to support UK enterprise?
Key Autumn Statement measures for business owners
Here are the main announcements we think should be on your radar.
Corporation tax – the planned increase in the corporation tax (CT) rate to 25% for companies with over £250,000 in profits will go ahead. This puts the UK rate well ahead of the 21.30% EU average for CT, but higher taxation will help to bring in much-needed funds for the revenue. The CT rise in April 2023 will only affect the more profitable companies because of the Small Profits Rate.
Value Added Tax (VAT) – the rate of VAT remains at 20%, despite rumours that this could be an area where higher taxes might raise additional revenue. The VAT registration and deregistration thresholds of £85,000 and £83,000 respectively will remain at the current levels – staying in place for a period of 2 years from 1 April 2022.
Business rates – a package of business rates relief was announced, to help businesses cope with the current recession. The business rates multiplier has been frozen for another year and businesses in the retail, hospitality and leisure sector will be entitled to relief of 75% of their rates bills. There will also be measures to limit the cost of increases arising from the 2023 revaluation and to ease the impact of Small Business Rates Relief and Rural Rates Relief where those reliefs are lost as a result of the revaluation.
Research and development (R&D) – reform of R&D tax reliefs has already been announced in Autumn Budget 2021, with qualifying expenditure expanded to include data and cloud costs. There will also be a refocusing on innovation in the UK, alongside improvements to compliance to target abuse of the reliefs. In the Autumn Statement, it was also announced that:
Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%
Research and Development Tax Relief for small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%
SME credit rate will decrease from 14.5% to 10%.
Energy Profit Levy – the existing Energy Profit Levy (EPL) rate will rise by 10 percentage points to 35% from 1 January 2023. The investment allowance will be reduced to 29% for all investment expenditure (other than decarbonisation expenditure). The EPL is planned to end on 31 March 2028.
Electricity Generator Levy – from January 2023, a new Electricity Generator Levy (EGL) is to be introduced, with a temporary 45% tax that will be levied on extraordinary returns from low-carbon UK electricity generation. Commentators have questioned the logic of taxing renewable energy producers at a time when the Government could be offering incentives to move away from fossil fuels. The tax will be limited to generators whose in-scope generation output exceeds 100GWh across a period and will only then apply to extraordinary returns exceeding £10 million.
Company cars – in another less than green announcement, electric cars, vans and motorcycles will begin to pay vehicle excise duty (VED) in the same way as petrol and diesel vehicles. This measure is due to come into play from April 2025, but has already been criticised for failing to provide an incentive to switch to electric vehicles. The benefit-in-kind rate for electric and ultra-low emission cars emitting less than 75g of CO2/km will increase by 1 percentage point annually from 2025/26 to 2027/28. The rate will be a maximum of 5% for electric cars and 21% for ultra-low emission cars. The rate for all other vehicles will be increased by 1 percentage point for 2025/26 and fixed until April 2028.
Talk to us about the business impact of the Autumn Statement
There are choppy economic waters ahead for the UK’s business leaders. Navigating the coming year will be challenging, so it makes sense to review and refresh your business strategy and 2023 planning. We can help you understand the impact of the Autumn Statement on your future planning, to help you bring things up to date.
If you’re concerned about any of the Autumn Statement announcements, or want to sit down and talk through your 2023 strategy, please do contact us for a chat.