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Andy Vessey, Head of Tax gives his response to Autumn Statement

Shadow Chancellor, Rachel Reeves compared the government to “pickpockets,” saying they had forced the country into a “doom loop” of…

Author Photo by Andy Vessey

Shadow Chancellor, Rachel Reeves compared the government to “pickpockets,” saying they had forced the country into a “doom loop” of low growth, high taxes, and high inflation. By reference to ‘pickpocket’ I think she summed up Hunt and his proposals fairly accurately.

The Tories cannot claim to be the party of low taxation and champions of enterprise when they stifle business growth, particularly SME’s, with punitive tax measures. However, this is what you get with centrist politics – the lines are blurred and it is difficult to distinguish the two main parties by policies.


Corporation tax (C.T)

From 2023 we are set to a return to a similar C.T regime that we said goodbye to in 2015, with the re-introduction of the small profits rate. Whilst the rate of C.T will increase to 25% on profits exceeding £250K, companies with profits under £50K will still pay the current rate of 19% and there will be an effective marginal rate for profits between £50K – £250K so that companies will not pay the full 25% but greater than 19%. More C.T payable by SME’s and a layer of complexity being added to the tax system when what is required is simplification.


Dividend taxation

From April 2023, the dividend allowance is to be reduced from £2K to £1K, then halved again in April 2024 to £500. The incentive and reward to individuals running their own companies is yet again being squeezed & diminished. If future budgets continue hammering SMEs in this way, there will come a point when contractors may consider that it may not be worth the hassle and headache of running a limited company if they are simply going to be taxed in a similar fashion to employees.

Point 2.8 of the Autumn Statement only serves to support that view – “A fair tax system also ensures that individuals doing similar work pay a similar amount of tax, and those with unearned income also contribute.”  If any government gets around to harmonising tax & NIC then, in my opinion, IR35 would become obsolete.


Taxation by stealth

Personal allowance & higher rate thresholds, along with NIC thresholds already fixed until April 2026, will be maintained until April 2028. So, if and when wages rise, then the government will take more tax. Whilst these measures can be easily reversed if the economy grows, it’s that pickpocketing that Rachel Reeves mentioned!

The VAT registration threshold is maintained until March 2026, so more businesses will have to start charging VAT as they grow and will be saddled with the burden of MTD for VAT.


Additional rate

The 45% additional tax rate threshold is to reduce from £150K to £125,140 from April 2023, which is likely to be a blow for the higher end of middle earners. However, this group will receive little public sympathy as they will be regarded as having more resources with which to shoulder the national burden.


CGT allowance

The annual exemption is be cut from £12,300 to £6K from April 2023 and then halved to £3K from April 2024. Record amounts of capital gains and tax were recorded in 2020-2021, with total CGT liability increasing by 42% from the previous year. Whilst CGT only comes from a small number of taxpayers, the swingeing reduction in the annual exemption is likely to expose more taxpayers who dispose of capital assets in the future.

I’m left scratching my head as to how Hunt expects to stimulate growth with these proposals but his and Sunak’s main priority seems not to be the people of this country, but rather appeasing the markets!



Andy Vessey – ATT
Head of Tax

With over 40 years’ experience, Andy has been Head of Tax at Kingsbridge since 2019. He started his career at the Inland Revenue, before working at various accountancy practices. Andy has spent the last 20 years specialising in employment status, in particular IR35. He has successfully defended over 550+ contractors against HMRC IR35 enquiries and in 2018 he successfully represented Jensal Software Ltd at the First Tier Tax tribunal.

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