RITSONS | Autumn Statement Update

A number of measures in the Autumn Statement do not affect Scottish taxpayers.

NATIONAL INSURANCE

The National Insurance contributions secondary threshold (Employer) will be fixed at £9,100 from April 2023 to April 2028.

MINIMUM WAGE

The minimum wage rates will increase from April 2023 as follows:

• Over 23 years old - £10.42
• 21 - 22 year old - £10.18
• 18 - 20 year old - £7.49
• 16-17 year old - £5.28
• Apprentice rate - £5.28

We would recommend reviewing all staff pay rates to ensure any required increases are implemented as required.

Please see the HMRC link for full update - https://www.gov.uk/government/publications/minimum-wage-rates-for-2023

DIVIDENDS/SAVINGS

At present each individual is entitled to receive a dividend allowance of £2,000 per tax year which is taxed at 0%.

As of April 2023 this will reduce to £1,000 & April 2024 reduced to £500.

The current tax rates on dividends are as follows

Basic rate - 8.75%
Higher rate - 33.75%
Additional rate - 39.35%

The Income Tax additional rate threshold (ART) for the UK including Scotland is currently £150,000. This has been reduced to £125,140 for England, Wale & NIC, from 6 April 2023 for all earnings.

However, the UK ART rate of £125,140 will be the level at which a Scottish tax payer with savings & dividend income will pay additional rate taxes.

CAPITAL GAINS TAX

The Capital Gains Tax Annual Exempt Amount which each individual is entitled to each tax year is currently £12,300. From April 2023 this will reduce to £6,000 & April 2024 reduce to £3,000 per tax year.

For business owners selling shares, this change will increase the Capital Gains Tax payable on a share disposal by up to £630 for disposals in the 2023/24 tax year and £930 from April 2024, where the disposal is covered by Business Asset Disposal Relief. Where Business Asset Disposal Relief is not available, the additional tax could increase to £1,260 in the 2023/24 tax year and £1,860 from April 2024 for a higher rate taxpayer.

In the case of the sale of residential property, that same higher rate taxpayer could pay an additional £1,764 in the 2023/24 tax year and £2,604 from April 2024.

What rules do taxpayers need to be aware of?

Section 28 TCGA 1992 outlines the rules for the timing of disposal. This is normally when an unconditional contract has been completed, rather than the completion date (if different).

Where the contract is conditional on an event taking place, then the disposal is treated as having taken place once the condition has been satisfied.

Therefore, if a taxpayer has entered into a contract which concludes in March 2023 but is completed in late April 2023, this will be treated as a disposal in the 2022/23 tax year and the current £12,300 AEA applicable, even though the disposal proceeds are not received until the 2023/24 tax year. If there was a condition that was not satisfied until completion, then it would be classed as a 2023/24 disposal and only £6,000 AEA available.

In the case of a property disposal in Scotland, the disposal would normally be treated on the date that the legal missives are concluded. It is important to remember that any Capital Gains Tax on the sale of UK residential property must be reported to HMRC within 60 days of the completion date.

CORPORATION TAX

The government will proceed with the introduction of a new top rate of corporation tax of 25% from next April.

From April 2023, the following rates will apply:

• a main rate of 25% payable by companies with profits over £250,000
• a small profits rate of 19% payable by companies with profits of up to £50,000
• companies with profits between £50,000 and £250,000 will pay the main rate, reduced by "marginal relief" - consequently paying tax at a rate between 19% and 25%, with the effective rate gradually increasing as profits approach the main rate threshold

The Capital Allowances super deduction is due to expire on 31 March 2023.

CAPITAL ALLOWANCES

As noted above the super deduction available to Companies of 130% tax relief of qualifying assets will expire on 31 March 2023.

Please note that in the event an asset was sold which claimed the super deduction, the disposal proceeds received would be multiplied by 1.3 in the tax year in question (effectively reclaiming the extra 30% benefit received).

The First Year Allowances for electric vehicle charge point will extend to 31 March 2025 for Corporation tax & Income Tax relief.

The capital allowances limit for annual investment allowances is to stay at £1,000,000 per tax year.