Chancellor delivers his autumn statement 18 11 2022

The autumn statement delivered by Jeremy Hunt on 17 November has left many business owners and individuals scrambling to understand what it means for their finances. The Chancellor’s announcements touch on nearly every corner of the UK tax system—from corporation tax to national insurance—so we’ve broken down the key points that are likely to affect you, whether you’re running a limited company, trading as a sole trader, or simply trying to plan ahead.

Corporation Tax and the Profits Rise

One of the most significant changes announced is the rise in corporation tax to 25%, effective from 1 April 2023. This applies to profits exceeding £250,000 per annum. For businesses with profits between £50,000 and £250,000, a reduced rate of 19% will apply—welcome relief, though still higher than the current 19% flat rate. Many owner-managed businesses will need to revisit their profit forecasts and consider whether incorporation remains the most tax-efficient structure.

If you’re approaching the £250,000 threshold, now is the time to speak with your accountant about potential planning strategies. However, we’d urge caution—aggressive tax avoidance schemes will attract HMRC scrutiny, and the Government has signalled a tougher stance on compliance.

Self-Assessment and Income Tax Allowances

The personal allowance and basic rate band remain frozen at their current levels: the personal allowance stays at £12,570, and the basic rate band is frozen at £50,270 (for 2022–23). This means many higher earners will be dragged into the higher rate tax band over time, a phenomenon known as “fiscal drag.”

For sole traders and those with trading income, this underscores the importance of legitimate tax planning. Pension contributions, for example, remain one of the most effective ways to reduce your taxable income. If you’re self-employed, contributions to a personal pension plan are deductible from your profits before calculating your self-assessment liability.

The self-assessment deadline remains 31 January for each tax year, so if you haven’t yet filed your 2021–22 return, do so promptly to avoid penalties.

National Insurance and Employment Costs

The threshold at which employers pay national insurance has been increased, which is a positive for small businesses. From November 2022, employers’ NI is payable only on earnings above £9,100 per annum (up from £8,840). Employees will also benefit from a higher threshold for employee NI contributions.

However, this welcome relief is tempered by the Health and Social Care Levy, a 1.25% payroll tax that applies from April 2023. Employers with payroll above £3 million will need to factor this into their costs.

Dividend Allowance and Capital Gains

The dividend allowance remains at £500 per annum (for the current tax year), and the capital gains tax annual exemption sits at £3,000. These frozen thresholds effectively represent a tax rise for many business owners who extract profits via dividends.

Director-shareholders should review their dividend strategy. For some, this may mean adjusting salary and dividend combinations. Others may find that retaining profits within the company (and benefiting from the lower corporation tax on lower profits) becomes more attractive—though this depends on your individual circumstances.

Looking Ahead to Tax Year 2023–24

The autumn statement is a staging post on the road to the Spring Statement, but business owners and individuals shouldn’t wait passively for further announcements. Now is the time to think about tax planning for the year ahead: pension contributions, gift aid donations to charity, and the timing of invoicing and expenses can all make a material difference to your liability.

What You Should Do Now

If you’re a limited company, request an updated corporation tax forecast from your accountant. If you’re self-employed, review your estimated tax bill for the current year and ensure you’re setting aside sufficient funds for January’s self-assessment payment. And if you employ staff, confirm that your payroll software is updated to reflect the new national insurance thresholds.

The autumn statement has fundamentally shifted the tax landscape. While some of these changes won’t take effect until April 2023, planning begins today.

For tailored advice, contact Severn Accounting — we’re here to help.