UK Chancellor Jeremy Hunt on 17 November delivered an Autumn Statement intended to bring stability, protect growth in the economy and continue to fund public services. The plan raises taxes largely by relying on threshold freezes and fiscal drag rather than headline rate increases. Investment in energy efficiency and independence, infrastructure and targeted support for businesses are intended to encourage medium-term growth.
BDO in the UK has broken down the announcements from the Autumn Statement 2022 into sections. You can find in-depth analysis of corporate tax, personal tax, indirect tax, employment tax and other notable measures here.
The Chancellor outlined a number of changes to the Energy Profit Levy - increasing it to 35% from 1 January 2023 and extending its duration until 31 March 2028 while reducing allowance for the investment costs to 29%. He also announced the introduction of a separate levy for Electricity Generators.
The 25% windfall tax on energy companies was increased to 35%, though it remains a temporary measure.
The government confirmed its intention to implement the Pillar Two rules issued in draft form on 20 July 2022 in order to comply with the global minimum corporate tax rate of 15% proposed by the OECD.
The new rules will apply for accounting periods beginning on or after 31 December 2023. The implementation of the Pillar Two rules is intended to protect the UK tax base against aggressive tax planning and reinforce the UK’s competitiveness. The measure is anticipated to raise £2.3 billion a year by 2027- 2028.
From 1 April 2023, large multinational entities operating in the UK will be required to maintain a master file and a local file in a prescribed standardised format set out in the OECD transfer pricing guidelines.
In the meantime, HMRC will continue to consider the merits of the introduction of a Summary Audit Trail requirement. A Summary Audit Trail would consist of a questionnaire covering the main steps undertaken in preparation of the local file. It would constitute an additional compliance burden for businesses, in addition to preparing and retaining a master file and a local file.
The current tax-free personal allowance of £12,570 will be frozen until 2028 – a two-year extension to the freeze that was previously expected to end in 2026. The higher-rate tax threshold will also be frozen until 2028 – the 40% rate tax will be payable on all non-savings and savings income between £50,270 and £125,140.
The threshold for the highest rate of tax will fall from £150,000 to £125,140. The additional tax rate of 45% will be payable on all non-savings and savings income above £125,140, so any individual already paying the 45% rate in 2022/23 will face an income tax increase of at least £1,243 for 2023/24.
Individuals with income of more than £100,000 will continue to have their personal allowance tapered, with those on incomes of more than £125,140 not being entitled to any personal allowance.
These changes will not apply to Scottish taxpayers (not capital taxpayers), for whom the rate continues to be set independently by the Scottish Parliament, whose budget is due on 15 December 2022.
Jon Hickman
jonathan.hickman@bdo.co.uk