Autumn Statement 22: Overview for contractors
In the Autumn Statement, the Chancellor Jeremy Hunt set out his plan to stabilise the economy and reduce inflation through wide-ranging ‘stealth’ tax rises and spending cuts. In this post, we look at the key tax changes that contractors need to know about.
“Given the rollercoaster the sector has experienced with IR35, the overall feeling from today’s budget is that it could have been worse for contractors. There was no mention of IR35 in the Autumn Statement.
“As previously mentioned, the off-payroll reforms for 2017 and 2021 were repealed in the Mini Budget and then reversed a few weeks later. It’s ‘business as usual’ on IR35 and off-payroll working. Contractors still need to stick to a plan of doing due diligence and having open conversations with clients about risk.
“In terms of the specifics of the budget, we’re all going to be paying more tax in the coming years. With that in mind, there was a lot the government could have introduced to penalise contractors and small businesses but in the end those measures weren’t forthcoming.
“However, that’s not to say they won’t feel a difference from the Budget – contractors now face a triple whammy of frozen income tax thresholds, a reduction in the dividend allowance and the lowering of the additional income tax rate.
“If you’re a contractor, it’s a good time to take stock. Review your current salary, get some sound advice from your accountant, and ensure you have the checks and balances in place to manage your exposure to changes and navigate the challenging climate effectively.”
James Poyser, inniAccounts CEO and Founder of OffPayroll.org.uk
“As previously mentioned, the off-payroll reforms for 2017 and 2021 were repealed in the Mini Budget and then reversed a few weeks later. It’s ‘business as usual’ on IR35 and off-payroll working. Contractors still need to stick to a plan of doing due diligence and having open conversations with clients about risk.
“In terms of the specifics of the budget, we’re all going to be paying more tax in the coming years. With that in mind, there was a lot the government could have introduced to penalise contractors and small businesses but in the end those measures weren’t forthcoming.
“However, that’s not to say they won’t feel a difference from the Budget – contractors now face a triple whammy of frozen income tax thresholds, a reduction in the dividend allowance and the lowering of the additional income tax rate.
“If you’re a contractor, it’s a good time to take stock. Review your current salary, get some sound advice from your accountant, and ensure you have the checks and balances in place to manage your exposure to changes and navigate the challenging climate effectively.”
James Poyser, inniAccounts CEO and Founder of OffPayroll.org.uk
Autumn statement key points:
Tax:
- Dividend allowance cut from 2023
- The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
- The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
- Threshold for top rate of income tax cut from 2023
- The threshold for when the highest earners start paying the top rate of tax will be brought down from £150,000 to £125,140 from 6 April 2023. The Chancellor said that those earning £150,000 or more will pay just over £1,200 more a year.
- Personal income tax thresholds frozen until 2028
- Income tax, National Insurance and Inheritance Tax thresholds will be maintained at their current levels for a further two years.
- This means millions of people will be paying more tax on their incomes over time as wages increase and people move into higher tax brackets.
- Reduction in Capital Gains tax annual exemption
- The government will reduce the Capital Gains Tax Annual Exempt Amount from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
- Stamp Duty Land Tax cuts to remain until 2025
- The increase to the nil-rate threshold of SDLT from the mini budget on 23rd September is now a temporary reduction.
- The SDLT cut will remain in place until 31 March 2025 to support the housing market.
- The energy industry will be hit with an expanded windfall tax of 35% until March 2028.
- Electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system fairer.
Investment
- The government maintained its commitment to major infrastructure projects including East West Rail, core Northern Powerhouse Rail, and High Speed 2 to Manchester, saying that these will provide fast, more reliable services and connect people to new job opportunities.
- A new nuclear power plant will be built at Sizewell, which the Chancellor said will create 10,000 new skilled jobs and contribute to energy independence.
Support
- Support for energy bills will remain in place this winter, with the Energy Price Guarantee rising to £3000 from April 2023 and further support targeting those most in need.
- Support for businesses
- There will be targeted support to help with business rates costs worth £13.6 billion over the next 5 years.
- There will be an increase in the National Living Wage from the current level of £9.50 an hour for over-23s to £10.42 an hour.
- The government will also raise benefits, including working age benefits and the State Pension, in line with inflation from April 2023, ensuring they increase by over 10% in line with September’s inflation figure.
Tax optimisation for contractors and consultants
See our guide on choosing a tax efficient salary to explore different salary strategies for contractors and consultants.