The government published the Autumn Finance Bill 2022 on 22 November 2022. The Bill is officially known as Finance Bill 2022-23. The Bill contains the legislation for many of the tax measures announced in the recent Autumn Statement.
The Autumn Finance Bill will be followed by the main Spring Finance Bill 2023 which will be published after the spring Budget and will cover any remaining tax measures needed ahead of April 2023. Summary of most important changes to the UK Finance Bill is summarised in the following infographic.
Some of the many measures included within the Bill are:
- The Energy Profits Levy (EPL) will increase to 35% (from 25%), effective 1 January 2023. The investment allowance will be reduced from 80% to 29% for qualifying investment expenditure thereby maintaining its existing cash value.
The government introduced the Energy (Oil and Gas) Profits Levy in May 2022 to respond to exceptionally high prices that mean oil and gas companies are benefiting from extraordinary profits.
European and UK wholesale gas prices reached record highs this year and are expected to remain significantly elevated for the foreseeable future. This is driven by global circumstances, including resurgent demand for energy post COVID-19 and the invasion of Ukraine by Russia.The proposed changes are not expected to have any significant impact on individuals, households and families. In contrast, around 200 companies operating in the UK will pay more tax, however, they will be able to claim additional tax relief through the Energy Profit Levy's investment allowance.
- The Income Tax additional rate threshold will be reduced from £150,000 to £125,140 with effect from 6 April 2023
This change will be implemented to support the government's objective of putting the public finances on a sustainable path in a way that is fair, with those on the highest incomes taking on a larger burden. These changes will apply on all income including non-savings, non-dividend income, for taxpayers in England, Wales and Northern Ireland. This will also apply to the savings rates, dividend rates and the default rates which apply for taxpayers across the UK. These changes will not affect Scottish taxpayers. These changes will affect around 792 000 UK taxpayers in April 2023, with more men than women being affected by the changes.
- The current £2,000 dividend tax-free allowance is to be reduced to £1,000 from April 2023 and to £500 from April 2024.
The dividend allowance is not always an addition to the personal allowance. Sometimes it uses up part of the personal allowance. It should always be remembered that the personal allowance applies to all income. If the taxpayer has income from other sources, only one personal allowance may be claimed. For a detailed explanation, yuo can visit the HMRC website.
- Vehicle Excise Duty (VED) will become payable on new electric cars, vans and motorcycles from April 2025 in the same way as it currently applies to petrol and diesel vehicles. This change will apply to new and existing zero emission cars.
- The Income Tax thresholds will be maintained at their current levels for a further two years until April 2028. The higher rate threshold will remain frozen at £37,700 and the personal tax allowance will remain at £12,570 through to April 2028.
- The Research and Development Expenditure Credit (RDEC) rate will increase to 20% (from 13%) with effect from 1 April 2023.
- Small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% effective from 1 April 2023.
- The SME credit rate will decrease from 14.5% to 10% effective from 1 April 2023.
Source:HM Treasury| 28-11-2022
Forthcoming ‘basis of assessment’ reforms will change the way trading income is allocated to tax years for the self-employed. The changes will affect sole traders and partnerships that use an accounting date between 6 April and 30 March. There is no change to the rule for companies.
The reforms will change the basis period from a ‘current year basis’ to a ‘tax year basis’. Under the current rules there can be overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’ which is usually given on cessation of the business. The new method of using a ‘tax year basis’ will remove the basis period rules and prevents the creation of further overlap relief.
The new rules will come into effect in the 2024-25 tax year with 2023-24 being a transitional year. During the transitional year, all businesses’ basis periods will be aligned to the tax year and all outstanding overlap relief can be used against profits for that tax year.
Affected businesses in 2023-24 will be assessed on the tax for profits for the:
- 12-month accounting period they have previously been using; and
- for the rest of the 2023-24 tax year — minus any overlap relief that may be due — spread over the next 5 tax years.
The changes do not affect sole traders and partnerships who already draw up annual accounts to a date between 31 March and 5 April.
Affected businesses should ensure they are prepared for the changes as there may be cashflow implications.
Source:HM Revenue & Customs| 14-11-2022