The UK has had to increase some taxes for next year in order to pay for the very high cost of Covid support given to companies and individuals since the start of the pandemic. Everyone was expecting this.
In summary
All with effect from April 2023
Personal taxes
Income tax rates and thresholds are unchanged except for the highest earners, where the point at which they move onto the 45% Income Tax rate is reduced from GBP 150,000 to GBP 125,000.
Capital gains tax for individuals. The tax free allowance will be reduced from GBP 12,300 per year to GBP 6,000 from April 2023, and reduced again to GBP 3,000 from April 2024.
The tax free dividend allowance will be reduced from GBP 2000 per year to GBP 1000 per year for the tax year 2023/24.
Windfall taxes
Energy companies Windfall tax. Oil and gas companies will be taxed at 75% on their windfall profits (additional profits caused by world market conditions) until 2028. Windfall profits from nuclear and renewable generators will be taxed at 40%.
Climate change commitments
Climate change. The UK will keep to the commitments it made at COP 26.
Pensions and benefits
Pensions and state benefits will increase at the rate of inflation. There will be a one time additional support payment to pensioners and those receiving the most state benefits. During 2023 there will be a review of the age at which people should be able to receive their state pension.
Government spending
Government spending will be cut in most areas, except health and schools where more funding will be provided.
Investment incentives
The income tax relief available to individuals investing in EIS and SEIS companies is increased to cover investments up to GBP 1 million.
Companies
Company profits tax rates for smaller companies with taxable profits up to GBP 50k will remain at 19%. For larger companies with taxable profits over GBP 250k the tax rate will be 25% from April 2023. There will be a sliding scale for profits between GBP 50k and GBP 250k. This is around the average rate for larger countries in Europe.
The Annual Investment Allowance (AIA), that is the amount of capital investments companies can use to reduce their taxes, remains at GBP 1 million per year.
Research & Development tax relief will be at 186% for small and medium sized companies.
Other taxes
Cars. The UK has a system of taxes for the use of a car on the roads. It is called Vehicle Duty and is in effect a circulation tax. Electric cars have been exempt from this tax, but because there are so many new electric cars in use this is creating an unbalanced situationand is costing the Government a lot of money. Therefore electric cars will have to pay Vehicle Duty from April 2025.
NOTES
Company profits tax
UK will have the lower rate of 19% for companies with lower profits.
UK is the only European country to allow tax losses to be carried forward without any time limit, or to be carried back one year.
UK is the first European country to announce tax changes following Covid and the energy price crisis and we can expect other countries to raise their own tax rates in the next few months.
