What accountants need to know about the Autumn Statement

AAT gives its summary of the Autumn Statement by Chancellor of the Exchequer, Jeremy Hunt.

The Autumn statement included a significant number of tax and spending announcements and confirmed that the country is already in recession.

Hunt said that his plan was an ‘honest’ one to tackle the ‘cost of living’ crisis and rebuild the UK economy – saying that his priorities are stability, growth and public services; whilst also protecting the vulnerable. The Treasury documents accompanying the statement can be found here.

But one of the major features of the announcement was the Chancellor’s Britain is “now in recession”.

You can read what AAT members feel about prospects for the economy and their businesses here.

Among some significant announcements for accountancy was the decision to abandon plans for an Online Sales Tax. AAT led opposition to this proposal and will be commenting at greater length on the subject shortly.

Economic Context

• The Chancellor said that the OBR confirms that global factors are the primary cause of UK inflation
• There will be no change to the Bank of England’s remit, but it is important that fiscal and monetary policy work together
• OBR forecasts that average inflation will be 9.1% this year and 7.4% next year, to fall sharply from mid-2023.
• GDP to fall in 2023 by 1.4% before then rising yearly thereafter. Unemployment is also expected to increase in 2023.
• New fiscal rules have been announced, which require public sector net debt (excluding the Bank of England) to be falling as a percentage of GDP and public sector net borrowing to be below 3% of GDP by the fifth year of the rolling forecast

Taxation

• Headline rates of taxation will not be increased
• The Government will reduce the threshold at which the 45p rate becomes payable, from £150,000 to £125,140 from 6th April 2023
• The income tax personal allowance higher rate threshold; main NI thresholds and inheritance tax thresholds will all be maintained at current levels for a further two years to April 2028
• The Government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024, and reduce the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024
• Electric vehicles will no longer to be exempt from Vehicle Excise Duty from April 2025
• The Stamp Duty cuts announced in the September Mini Budget will remain in place only until March 2025
• The Government will fix the level at which employers start to pay Class 1 Secondary NICs for their employees (the Secondary Threshold) at £9,100 from April 2023 until April 2028.
• The previously announced changes to the Bank Corporation Tax Threshold will go ahead
• From April 2023, the rate of Diverted Profits Tax will increase from 25% to 31%
• The VAT registration and deregistration thresholds will not change for a further period of 2 years from 1 April 2024
• The OECD digital tax rules for global tech companies will be implemented in UK
• Legislation will be brought forward so that shares and securities in a non-UK company acquired in exchange for securities in a UK close company will be deemed to be located in the UK – to prevent CGT avoidance.
• The Government will not be proceeding with an Online Sales Tax, and will respond to the recent consultation on this subject shortly
• For expenditure on or after 1st April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.
• The Government is extending the Energy Profits Levy to the end of March 2028, and increasing its rate by 10 percentage points to 35% from 1st January 2023.
• The Government is introducing the Electricity Generator Levy, a temporary 45% tax that will be levied on extraordinary returns from low-carbon UK electricity generation.
• The Government will proceed with the revaluation of business properties from April 2023, with a new transitional relief scheme to benefit 7,500 businesses.
• Import tariffs will be cut on over 100 goods

Public Spending and Services

• Public spending to be grown more slowly than growth in the economy
• After this Spending Review period, departmental resource spending will grow at 1% a year in real terms
• To help identify further savings in departmental budgets, the Government is launching an Efficiency and Savings Review
• The 0.7 aid target cannot be met until fiscal situation allows, but is committed to doing so
• The Government is providing additional funding of £3.3 billion in each of the next 2 years to support the NHS in England
• A further £79 million will be invested over the next 5 years to enable HMRC to allocate additional staff to tackle more cases of serious tax fraud and address tax compliance risks among wealthy taxpayers
• Sir Michael Barber has been appointed to advise on the implementation of Government’s Skills Reform Programme
• The Government will review retained EU law to identify changes that can be made over the next year with the greatest potential to unlock growth in key growth industries – digital technology, life sciences, green industries, financial services, and advanced manufacturing.
• The Department for Work and Pensions will carry out a review of issues holding back workforce participation, which will report in the New Year

Growth

• The Government will refocus the Investment Zones programme to catalyse a limited number of high potential clusters
• The new powers for the CMA’s Digital Markets Unit will be legislated for
• New mayoral devolution deals across the UK have been agreed
• Ministers have published a consultation response setting out the final reforms of Solvency II
• The new nuclear power plant at Sizewell C will proceed
• Ministers will seek to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030 against 2021 levels
• There will be no cuts to capital infrastructure budgets
• R&D budget to be protected; and increased to £20 billion in 2024-25.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.