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Chancellor’s Autumn Statement

Posted on by Andrew

Here we are again, just 8 weeks after the last budget statement! Hopefully this one will make it through to implementation, but this time we are looking at tax hikes instead of tax cuts. Below are some of the important highlights in relation to tax, but the full statement can be found here.

Personal taxes

The point at which the 45% rate of income tax applies will be reduced from £150,000 to £125,140.

The allowances and bands for income tax and national insurance will be frozen until April 2028, which effectively means more people will pay more tax, and at higher rates, as a result of increasing wages and inflation.

The tax free dividend allowance will be reduced from £2,000 to £1,000 next year, and then to £500 from April 2024.

The Capital Gains Tax annual exemption amount is to reduce from £12,300 to £6,000 from April 2023, and then to £3,000 from April 2024.

Business taxes

As announced previously, the original planned changes to Corporation Tax will now go ahead, meaning that from April 2023, the new tax rate will be 25%, but to help protect small businesses a £50,000 small profits rate will be introduced, set at the current rate of 19%. Once a company’s profits rise above £50,000 a taper will apply, so that only businesses with profits above £250,000 will have to pay the full 25% rate.

Employers’ NIC thresholds are to be frozen, and the Employment Allowance remains at £5,000 per year.

The VAT threshold to remain at £85,000 for 2 years.

Company Electric Cars

Posted on by Andrew

With the price of fuel soaring and the government encouraging more people to consider greener modes of transport, we are being increasingly asked about buying or leasing electric cars through a personal company.

Here we provide a brief summary of how this may benefit you, but please note this advice only applies to businesses who trade as a limited company (not ordinary self employed and partnerships).

Ordinarily, it doesn’t make sense for business owners to operate their own car that they will use for business and private use, through a limited company. This is because of the high taxable benefit charge that applies to most cars, to tax the private use element.

However, the government are currently offering an incentive to encourage ownership of pure electric cars, which means for companies, there is currently a very low taxable benefit charge. Therefore, even after paying the taxable benefit charge and additional National Insurance on the car, there is likely to be an overall tax saving, after factoring in corporation tax relief on the cost of the car and running costs.

There are still downsides to consider though:

  1. The cost of electric cars is still relatively high compared to petrol cars, which means any tax saving may be wiped out by the extra purchase or lease costs.
  2. The low taxable benefit charge is currently only suggested to last until April 2025, after which time, we don’t know if the government will raise the charge, or to what extent. That could then totally negate any saving at that point.

However, for some people who are in the market for a new car at this time, it could still be something to consider, but we would say that you would probably fit one of the following categories:

  1. You are currently in the market for a new car.
  2. You are interested in the option of ‘going green’ and the price is less of an issue.
  3. You have surplus funds in your company, that to extract to buy a car privately, would incur additional taxes that could be avoided by buying a company vehicle instead.

It is quite a complex scenario and isn’t the correct option for everyone, but if the idea of a company electric car interests you, please ensure you discuss this with us first before you buy or lease one through the company, because it must be reported to HMRC immediately, and the benefit in kind taxes calculated.

Minimum Wage Changes

Posted on by Andrew

From 1 April 2023, the National Living Wage and National Minimum Wage rates will increase. The new rates will be as follows:

  • Aged 23 and over: £10.42 per hour
  • Aged 21 to 22: £10.18 per hour
  • Aged 18 to 20: £7.49 per hour
  • Aged 16 to 17: £5.28 per hour
  • Apprentices: £5.28 per hour

Salaried employees

Employers will need to check if the above changes affect any employees who are paid a fixed salary, rather than variable hours. The salary must be no lower than the equivalent hourly rate calculated by reference to their normal contracted hours.

Non-payrolled employees

If you don’t currently operate a payroll scheme because your employees earn less than the Lower Earnings Limit (LEL), you will need to check whether this increase affects you. From April, the LEL will remain at £123 per week, above which employees’ wages must be reported on a payroll scheme.

National Minimum Wage Pitfalls

Employers should also make sure any calculations of minimum wage levels take account of other circumstances that might occur in the workplace. This previous article provides some examples here.