Autumn Statement 2022

Haines Watts’ experts react

Following last week’s much-anticipated Autumn Statement and our Budget at a glance, we’ve had time to digest everything and figure out what it all means.

Much of what Chancellor Jeremy Hunt had to say was uncontroversial and unsurprising, but there are some key points which will impact UK business owners.

We know you’ll have plenty of questions, so we’ve gathered reaction and insights from our experts across the UK to help make sense of the latest announcements.

In case you missed it or you’re looking for a full summary, have a read of our detailed overview of the Autumn Statement 2022.

Watch summary video Read detailed summary

Highlights and Impact

David Fort discusses the highlights and impacts

What the budget means for inheritance tax

Nicola Goldsmith discusses the impacts on Inheritance tax.

Changes to SME R&D tax relief

From the Partners

Initial reactions to the Budget

Tax Partner, Martin Gurney, described the Budget as “relatively neutral” and “designed to redress deficits without further destabilisation”.

Nicola Goldsmith, Head of Private Client, suggested it was a “redelivered Budget [...] designed to help soothe the markets and strengthen the pound”.

This was echoed from our experts across the UK, including Ian Haynes, Tax Director for Haines Watts Scotland. He argued that the announcement was really just a case of “dotting the i’s and crossing the t’s”, with most of the detail leaked or confirmed in advance.

However, there are some concerns about the lack of long-term strategy. David Fort, Partner at Haines Watts Manchester, described the latest Budget as a “knee-jerk response”.

“They seem to be floating ideas to see what reaction that they get. I know some of the things that were put out there over the last couple of weeks have now disappeared off the agenda because there was pushback from businesses,” he said.

Martin explains that while the overall plan appears to be sound commercial strategy, the Chancellor cannot further destabilise the economy with very significant tax increases or spending cuts. Instead we’re seeing freezes, which Nicola describes as “fiscal drag”.

The ‘highlights’ and the impact

Let’s take a look at some of the key areas in more detail and find out what our experts at Haines Watts have to say about how it will affect business owners like you.

Tax changes

Much of what was announced in the September Budget has been reversed, with the 20% rate of income tax now set to remain indefinitely, and plans to scrap the 45% additional rate being abolished. However, the point at which the additional rate will be paid has changed from £150,000 to £125,140.

Other changes include a planned increase to corporation tax – from 19% to 25% for those with profits of £250,000 – and the reduction of the Dividend Allowance from £200 to £1000 in April 2023, and again to £500 in April 2024. Another important change is the extension to Rishi Sunak’s original freezing of the income tax personal allowance and higher rate threshold.

Whilst fiscal drag isn’t anything new, it’s rare for it to be applied in this way and has never usually been in place for things like personal allowances, according to Nicola. She added that this would normally go up with inflation but by freezing it in this way, and with inflation as high as it is, it will affect more people.

In short, more people will be “squeezed on both sides” and be put into the higher tax brackets.

“They're just going to have less disposable income, particularly with mortgage rates as well. So it's austerity by another name, particularly with the planned cuts and whether they're going to be able to be delivered,” Nicola said.

“It's worth talking to your accountant, your tax advisor and your financial advisor to see if there's anything that can be done to help reduce the pain of the tax, even if we can't help in other ways.”

From David’s perspective, the rise in corporation tax is key because the jump from 19% to 25% is so big at a low level of tax. He said that this will be a concern for businesses that will kick in in the next year, so the focus will need to be planning for that from a cash flow and profitability point of view.

Ian thinks freezing everything for several years is an interesting way of doing things, but that people will ultimately just alter their circumstances to avoid paying more. He also notes that business owners in the middle of a particular tax band may not see much change and it won’t impact them directly.

However, he said it’s important for clients to be aware of the changes; if you are bumped into a new band and have chargeable gains, you’ll need to complete tax returns, so get in touch with your local team if you need more support.

Business Research and Development (R&D)

There were lots of updates for businesses, including corporation tax rates, capital allowances, and Research and Development (R&D). There were also changes to the Seed Enterprise Investment Scheme, but our experts were most interested in the changes to R&D and the impact on SMEs.

Tax Partner, Sara Andrews, claims that “the Chancellor’s Budget announcement is a big hit for R&D tax credit payment” and that it will impact SMEs and startups the most. She explains that whilst the Research and Development Expenditure Credit (RDEC) increase might attract larger companies to the UK, SMEs face a less attractive incentive.

But it’s not all doom and gloom. Sara also goes on to say that the changes should go a long way to safeguarding the relief and tackling fraud, and that between now and spring, the government will be reviewing what other measures can be put in place to support SMEs.

Ian added: “we’re going to make sure that people are aware that whilst the potential net recovery is reduced, they are still going to be much better off by making a claim”.

He explains that some people might see this as a disincentive, but he would encourage anyone that’s eligible to still make a R&D tax claim.

Conclusion

There’s a lot for businesses to consider coming out of the Autumn Statement, and it’s important to understand how it will affect you. We’re here to provide some clarity and guidance, to help you navigate the changes and offer support when you need it.

Talk to our experts