Autumn Statement 2022 - How does it affect you?
The Autumn Statement has been announced and in this article we recap over the news.
In the government’s most recent revision of their fiscal plans to guide the UK out of recession, we see a lot of rollbacks from the mini budget as well as a lot of new propositions. You might struggle to pick out the bits that are important or affect you or your business - that’s why we’re here to help.
At a glance
Tax rises for some of the highest UK earners
National Living Wage to increase from April 2023
Energy bill support to be extended
More support for lowest income earners
Means-tested benefits to rise in line with inflation
Increase in NHS budget by extra £3.3 billion over 2 years
Extra £2.3 billion in funding for schools in England
Taxes are set to rise for highest UK earners
People earning less than £12,570 (the lowest band of earners) will not have their taxes changes until 2028. The basic tax bracket (£12,571 - £50,270) is also frozen until 2028 at a rate of 20%. The upper bracket for higher income earners has been changed from £150,000 down to £125,140 - taxed at a rate of 40%. People earning over £125,150 will be taxed 45%. These changes will take effect in April 2023.
As an employer, this means employees you give a pay rise to might end up in a higher bracket or your own take-home earnings might be taxed at a higher rate based on the above band changes.
Support for businesses to succeed
The government will be reducing the burden of business rates by providing £13.6 billion over the next 5 years. This includes increased relief for the retail, hospitality and leisure industries. They will also change the Annual Investment Allowance (AIA) to allow up to £1 million (was £200,000) to be claimed.
The AIA allows sole traders to deduct the value of items used to run their business from their profits before paying tax on their earnings. This is similar to the Cash Basis system, which may be preferable for sole traders earning less than £150,000 in income.
There might be good news for the future of inflation
The Office for Budget Responsibility (OBR) say inflation will drop to 7.4% from the current 11.1% next year - the goal for inflation is 2%. Experts say inflation will not directly stop prices from rising in the short term but according to current projections, we could see price drops from as soon as late 2024.
Inflation may or may not affect your business but it will certainly affect your clients or your customers’ ability to purchase products or services from you. You might have to revise your profit margins as you’ll likely see less over the months and years ahead.
Support for energy bills will be extended
The Energy Price Guarantee caps how much you pay for domestic energy usage. Currently, it’s typically capped at £2,500 per year for regular household energy use. The price cap was due to expire in April 2023, allowing energy companies to charge more per kWh - it’s now been extended another 12 months.
There is no cap on business energy but Energy Bill Relief Scheme does give business owners financial support to pay energy expenses from the 1st October 2022.
A new state pension rate
As part of the ‘triple lock’, state pensions are supposed to rise with inflation each year but after the last few months, people looked for confirmation on this. The Chancellor has said they will rise by 10.1% in line with inflation, coming as a relief to many. The government has also reviewed the age you will be able to claim your pension - which is set to rise to age 67.
Benefits will go up
A few types of disability benefits (i.e. Personal Independence Payment) are required to rise in line with inflation. The government has confirmed that they will. However, the Chancellor has also announced that means-tested benefits such as Universal Credit (which is claimed by around 6 million people) will also increase by 10.1%. This means families on UC could benefit from around £600 per year.
The National Living Wage will increase
The National Living Wage gets updated in the April of each year. Currently, the NLW is £9.50 per hour and this will increase to £10.42 in April 2023. This affects around 2 million people currently working for the NLW. Employers will not receive government support to pay employees the new Living Wage.
Electric Vehicles (EVs) no longer tax-exempt
The Office for Budget Responsibility forecasts that around 50% of vehicles will be electric by 2025. As such, to make the motor tax system “fairer”, electric vehicles will become taxable under the Vehicle Excise Duty (VED) from April 2025. The RAC says this change is unlikely to affect the sale of EVs in the UK.
If you use an electric vehicle for personal use (perhaps even as a company car) you may need to factor this into your finances when the changes roll around in just under 3 years time.
Worried about how the Autumn Statement affects your business?
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