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    GMS Flash Alert 2022-147

    United Kingdom – No Radical Departures in Autumn Statement 2022

    GMS Flash Alert 2022-208 | November 18, 2022

    The Chancellor of the Exchequer, Jeremy Hunt, delivered the Autumn Statement to the U.K. Parliament on 17 November 2022.1

    The key announcements that will impact globally-mobile employees are as follows:

    • The threshold at which additional rate income tax becomes payable at a rate of 45% will be reduced from £150,000 to £125,140 from April 2023;
    • The capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023, and then to £3,000 from April 2024;
    • The dividend allowance will be cut from £2,000 to £1,000 from April 2023, and then cut again to £500 from April 2024.

    Why this matters

    For employers of globally-mobile employees there is always a great deal of interest in the U.K.’s fiscal events as they can have a direct impact on the cost of assignments.

    In recent years there have been significant changes introduced relating to the taxation of non-domiciled individuals, retirement benefits, and the treatment of termination payments; however, announcements in this Autumn Statement that impact globally-mobile employees and their employers were limited to changes to the tax thresholds and tax-free allowances.

    There has been significant uncertainty in respect of tax matters in the U.K. in recent months, with four chancellors of the exchequer and three prime ministers in the last six months.  Employers may be hoping that despite the tax rises, this Autumn Statement marks the beginning of a period of greater certainty and stability.

    Context

    This follows on from the “mini budget” delivered by the previous Chancellor, Kwasi Kwarteng, on 23 September 2022, and the subsequent reversals of many of the announcements which he had made.3,4,5

    Whereas September’s “mini budget” had proposed tax-cutting measures, ahead of the Autumn Statement Jeremy Hunt had warned that taxes would rise to help fill the gap in the public finances and tackle the cost-of-living crisis.  In the Statement, he stressed that his three key priorities were “stability, growth and public services.”

    Prior to the Autumn Statement, there was speculation that there could be changes to the taxation of non-domiciled individuals, as well as potential changes to bring the capital gains tax rates in line with the income tax rates.  However, no such announcements were made, with the Chancellor instead choosing to avoid any radical departures from the existing personal tax regime.

    Overview of Main Measures

    Personal Income Tax Rates and Thresholds

    At the March 2021 Budget, the then Chancellor – and current Prime Minister – Rishi Sunak announced that the personal allowance and income tax higher rate threshold would be “frozen” for four years from 6 April 2022.6  The freeze has now been extended by a further two years, to April 2028.

    The threshold for the 45% additional rate band is currently £150,000, and this will be reduced to £125,140 with effect from April 2023.  No other changes were made to the personal allowance, or basic rate or higher rate thresholds.

    Current

    2022/23 Tax Year

     Rate Threshold
    Personal Allowance0%£12,570
    Basic rate20%£0 - £37,700
    Higher rate40%£37,701 - £150,000
    Additional rate45%Over £150,000

    New

    2023/24 Tax Year

     RateThreshold
    Personal Allowance0%£12,570
    Basic rate20%£0 - £37,700
    Higher rate40%£37,701 - £125,140
    Additional rate45%Over £125,140

    Source: KPMG LLP (U.K.)

    Scotland

    The tax rates for Scottish taxpayers will be set by the Scottish Parliament in December 2022.7

    Wales

    The Welsh Senedd sets income tax rates for Welsh taxpayers.  The draft budget will be published in December 2022.8

    National Insurance Contributions (NIC)

    As previously announced, Class 1A NIC, Class 1B NIC, and employer’s NIC in respect of directors who are subject to an annual earnings period will revert to 13.8% for 2023/24.  The rates of Class 1 employee’s and employer’s NIC will remain unchanged for 2023/24.

    The National Insurance thresholds will remain frozen at their current levels until April 2028.

    2023/24
    Annual Threshold for employee NIC     £12,570
    Annual Threshold for employer NIC                 £9,100
    Upper Earnings Limit £50,270
    2023/24
    Class 1, 1A and 1B NIC rate for employers on earnings above the Annual Threshold13.8%
    Class 1 NIC rate for employees between the Annual Threshold and Upper Earnings Limit12%
    Class 1 NIC rate for employees above the Upper Earnings Limit2%

    Source: KPMG LLP (U.K.)

    Dividend Rates

    The dividend tax rates had previously been increased by 1.25% with effect from 6 April 2022.  Dividends will continue to be taxed at these rates.

    The dividend tax-free allowance will be reduced from the current rate of £2,000 to £1,000 from April 2023, and then cut again to £500 from April 2024.

    Dividend Tax-Free Allowance and Rates

     2023/242024/25
    Dividend allowance£1,000£500
    Basic rate8.75%8.75%
    Higher rate33.75%33.75%
    Additional rate39.35%39.35%

    Source: KPMG LLP (U.K.)

    Capital Gains Tax

    The Chancellor announced that the tax-free capital gains tax allowance will be reduced from £12,300 to £6,000 from April 2023, and then again to £3,000 from April 2024.

    This will have the impact that more taxpayers will be paying capital gains tax, where their gains had previously been under the allowance.

    However, no changes were announced to the capital gains tax rates.6

     2023/242024/25
    Tax-Free allowance£6,000£3,000
    Basic rate – property18%18%
    Basic rate – other gains10%10%
    Higher/additional rate – property28%28%
    Higher/additional rate – other gains20%20%

    Source: KPMG LLP (U.K.)

    Other Measures

    • No changes were announced in respect of the tax treatment of pension contributions, and the pension annual allowance and lifetime allowance will remain frozen at their current levels.
    • No further announcements were made in respect of Making Tax Digital for Income Tax, and this is still expected to come into force from 6 April 2024 for most taxpayers with trading or property turnover in excess of £10,000 per annum.
    • No changes were announced to the personal savings allowance.

    KPMG LLP (U.K.) NOTE

    Employers may be disappointed that the personal allowance, and the basic rate and higher rate thresholds will be frozen, which, along with the reduction in the additional rate will lead to individuals paying a higher amount of tax in real terms when the impact of inflation is factored in.

    Employers may be relieved that no immediate changes were made to the taxation of non-domiciled individuals and the remittance basis, as the current rules allow many non-U.K.-domiciled assignees to the U.K. to exclude their non-U.K. income and gains from U.K. taxation and changes to these rules could lead to further U.K. tax reporting obligations and U.K. taxes due.

    Next Steps

    KPMG LLP (U.K.) will continue to keep readers informed of any further developments that concern individuals, including those on international assignments, and their multinational employers. 

    Contacts

    mike-lavan
    Mike Lavan

    Director – Global Mobility and Employment Tax

    KPMG in the UK

    Nicola Sard
    Nicola Sard

    Senior Manager

    KPMG in the UK

    Additional Resources

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    Footnotes

    1  For the U.K.’s "Autumn Statement 2022," click here.  For coverage and analysis of the Autumns Statement 2022 by KPMG L:LP in the U.K., click here.

    2  For coverage of the previous Budget, see GMS Flash Alert 2021-267 (27 October 2021).

    3  For coverage by KPMG LLP (U.K.) of the Autumn 2022 Growth Plan, see GMS Flash Alert 2022-172 (27 September 2022).

    4  For coverage by KPMG LLP (U.K.) of the cancellation of the abolition of the 45% tax rate, see GMS Flash Alert 2022-177 (4 October 2022).

    5  For coverage by KPMG LLP (U.K.) of the reversal of the measures announced in the 2022 Growth Plan, see GMS Flash Alert 2022-189 (18 October 2022).

    6  For coverage by KPMG LLP (U.K.) of the March 2021 Budget, see GMS Flash Alert 2021-074 (3 March 2021).

    7  For the announcement of the date of the 2023-24 Scottish Budget, click here.

    8  For the Welsh government Draft Budget timetable for 2023-24, click here.

    Disclaimer

    The information contained in this newsletter was submitted by the KPMG International member firm in the United Kingdom.

    GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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