Breakdown of The Autumn Budget Update 2022

How the November Autumn budget update will affect small businesses

On 17 November, The Chancellor of the Exchequer, Jeremy Hunt, gave his 2022 Autumn Statement to Parliament and published documents with further details. 

This was a bit of a U-turn from the disastrous mini-Budget delivered by Kwasi Kwarteng, which triggered a rise in mortgage rates as markets decided Britain could not be relied on to pay its debts. Yikes. 

So, hopefully, this is the last time that I’ll be updating you on government tax changes…for a while! 

The statement is a lengthy read so I’ve broken this down as simply as I can and pulled out the things that are likely to affect your business.

Let’s dive in…

Dividends

This is the one I’m most upset about. The tax-free allowance for dividends is currently £2k, i.e. you can receive £2k dividends without getting taxed.

From April 6th the allowance will be £1k and from April 6th 2024 the allowance will be £500.

This, along with a number of other factors, changes the point at which it becomes desirable to become a limited company! If you’re thinking about this move reach out to an accountant.

Capital Gains Tax

This tax comes into play when you sell an asset you own. I.e. a painting or a second house. You get taxed on the gain – so if you bought a painting for £5k and sold it for £25k you’d get taxed on the £20k gain you’ve made.

Again the tax-free allowances are going down. It’s changing from £12,300 to £6,000 from April 6th, 2023 and then down to £3,000 from April 6th, 2024.

Income Tax 

The additional rate band will now start at £125,140 so anything earned over this will be taxed at 45%

The personal allowance is frozen until 2028 (unless the government changes their mind before then). This doesn’t sound bad but it means as wages/profit rise with inflation the tax-free amount doesn’t so effectively you end up paying more tax for the same work. Sneaky I know!

Staying the same 

A couple of things worth noting that are staying

• £5k Employment Allowance is staying for small employers (doesn’t include single director companies though)

• Stamp duty cuts remain

One quick thing you can do to get on top of your finances this season:

Take a second to think about seasonal “special offers”:

• Be strategic – don’t get sucked into deals for things you don’t need, and make sure you have the funds to warrant the spend
• If you’re running seasonal deals make sure the numbers behind them work. Don’t over-discount and end up making a loss.
• If you’re not running seasonal offers don’t be pressured into doing it at the last minute unless you’ve got the numbers behind it.

Still confused?

Feel free to book a Power Hour to ask me any questions you have.