Opinion - Autumn Statement 22

The Autumn Statement was bad news for most taxpayers but which of the changes announced will affect you as a business owner Click here for our coverage

Few surprises. Jeremy Hunt delivered on his warning that taxes would rise in his first Autumn Statement. Many of the changes involved freezing tax and NI allowances and thresholds to collect more tax as incomes rise with inflation over the next few years.

Not so stealthy. These types of tax increases are often, and in our view inaccurately, referred to as stealth taxes. We’re not sure stealthy fits with changes that are easily understood and open to public scrutiny. Nevertheless, however you describe them they’ll have a significant impact on your tax bills, especially if you’re a company owner-manager.

Company owners. As a director shareholder your income will be hit on several fronts:

• the amount of personal tax-free allowance has been frozen at £12,570 until at least April 2028

• from April 2023 the point at which additional rate tax kicks in (45% for salary etc. and 39.35% for dividends) falls from £150,000 per year to £125,140

• also from April 2023, the dividends you can take tax-free from your company, currently, £2,000, will fall to £1,000. From April 2024 this will fall to £500

• the NI thresholds for salary etc. are frozen at £9,100 per year for employers and £12,570 for directors and employees until April 2028.

The changes listed above will especially impact you if you use a low salary plus dividends strategy for extracting income from your company. The increase in corporation tax rate from 19% to 25% from 1 April 2023, which was announced before the Autumn Statement will also have a big impact.

Before April sit down with a calculator or your contact @ hewitts to check if your current profit/income extraction policy needs changing before the Budget changes take effect.