Autumn Statement 2022 - what will it have in store for individuals and businesses?

A recap of recent events

The past few weeks in the UK have seen an unprecedented number of governmental changes and fiscal announcements. A package of measures heralded as ‘The Growth Plan’, triggered market turmoil and several of the proposals made as part of the plan were promptly withdrawn. The then UK Prime Minister, Liz Truss then appointed Jeremy Hunt to replace Kwasi Kwarteng as Chancellor of the Exchequer, and the former Health Secretary swiftly reversed more of the proposals.

Under Liz Truss’ leadership, Mr Hunt announced that he would deliver the Government's Medium Term Fiscal Plan with forecasts from the independent Office for Budget Responsibility (OBR) on 31 October. However, following the resignation of Liz Truss, and appointment of Rishi Sunak as Prime Minister the delivery of the plan has been postponed until 17 November and renamed the Autumn Statement.

Almost every year since 1997 in the UK, we have had either a Spring budget and an Autumn statement (which was known as the pre-Budget Report before 2010) or a Spring statement and an Autumn budget. Finally we appear to be returning to a familiar pattern of fiscal events and we expect significant announcements to be made when the Autumn Statement is delivered on 17 November.

Filling the fiscal deficit

The messaging currently emanating from the UK Government is clearly intended to prepare taxpayers for increased taxes to partly fill the fiscal deficit. Given the size of the numbers being reported, the Chancellor may be tempted to look to the three big revenue raisers of VAT, income tax and national insurance contributions (NICs). Mr Sunak had originally proposed the 1.25% in NIC increase as Chancellor, but legislation reversing this increase (and abolishing the health and social care levy) has just been passed by Parliament. In addition, since becoming Prime Minister, Mr Sunak has re-emphasised that he is still committed to delivering the 2019 Conservative manifesto. The manifesto included a promise not to increase rates of VAT, income tax or national insurance. So increases for the current tax year seem unlikely, but could we see an increase for the next tax year - possibly applying only to employers’ contributions and badged again as an NHS levy?

Regarding corporation tax - the increase in the rate for larger companies to 25% has already been enacted, and was introduced by Mr Sunak when he was Chancellor, so we don’t expect any further changes to the headline rate. However, there are certain sectors, namely banking and energy, that have seen surcharges or levies applied in addition to the mainstream rate.

The banking surcharge was due to fall from 8% to 3% to recognise the increasing headline rate, and to avoid the UK becoming uncompetitive. We will hear in the Autumn Statement if this is still the intention.

Back in May, Mr Sunak as Chancellor announced that with immediate effect - a new tax would be introduced on the profits of oil and gas companies operating in the UK and UK Continental Shelf. The new tax called the Energy Profits Levy (EPL) is applied at a rate of 25%. To mitigate the impact of EPL and, with the stated aim of encouraging further investment in the sector, a new investment allowance was introduced, operating alongside the levy. It seems highly likely that the incidence of the EPL will be increased, either by raising the rate and/or by broadening the scope to include electricity generation, or alternatively - by restricting what qualifies for the investment allowance.

Apart from the above, we can expect other revenue raising measures such as frozen tax thresholds and maybe the reduction or removal of certain tax incentives.

Encouraging growth and productivity?

Whilst the immediate focus of the Chancellor will be to plug the fiscal deficit, there is also a need to facilitate growth and productivity.

Some indications of the areas of focus might be seen in the Tax Plan, which was introduced by Rishi Sunak alongside this year’s Spring statement. The Plan sets out his aim of boosting growth and productivity, with a focus on three key areas: capital, people and ideas.

The Tax Plan recognises that when the super-deduction comes to an end in March 2023, the UK capital allowance regime will be relatively uncompetitive compared with other large countries. HM Treasury held a high-level consultation in the summer looking at the role of capital allowances in incentivising investment. This may lead to first year allowances for machinery and plant, although the Treasury doesn't seem interested in more radical reform. One policy announcement still surviving from the ‘Mini-Budget’ was to permanently extend the Annual Investment Allowance to £1m. Clearly the proposals will be relevant to anyone who is looking to make capital investments. We discuss proposed reforms to the capital allowances regime in more detail in this article.

The Tax Plan also set out the Government’s aim of encouraging businesses to offer more high-quality employee training. It will explore whether the current tax system (including the operation of the Apprenticeship Levy) incentivises businesses to invest in the right kinds of training. It may be too soon to expect detailed proposals in this area as part of the Autumn Statement.

In addition, we might see an increase in the Research & Development Expenditure Credit (RDEC). The RDEC is a taxable item therefore given the impending increase in corporation tax, it will be necessary to increase the RDEC rate just to maintain its current value.

The Growth Plan on 23 September announced the establishment of around 40 Investment Zones throughout England. It was unclear how these would operate and how they would sit alongside the Freeports which had been introduced by Rishi Sunak when he was Chancellor. We might expect further announcements where this matter is concerned, including potentially the withdrawal of the Investment Zone initiative. Questions remain as to whether measures such as this lead to an increase in investment, or simply to a relocation from areas outside the zone.

Other consultations

HMT and HMRC specialists have also been consulting on issues such as sovereign immunity, cryptoassets, international tax obligations, Online Sales Tax, Corporate re-domiciliation and the tax administration framework, and we can expect to see what the next steps are in these areas.

Finally, it will be interesting to see whether Jeremy Hunt endorses his predecessor's decision to abolish the Office for Tax Simplification (OTS). Many commentators felt that this was a negative development and have called for it to be reconsidered.

Tax policy timetable for the next few months

Following the Autumn statement we are likely to see a number of Government consultations on potential changes to the tax system. We can also look forward to the Budget which will likely take place in March, and will be followed by the Finance Bill. Many of the measures for inclusion in the Bill have already been the subject of public consultation, and might be expected to complete their legislative journey.

Follow PwC’s coverage on the day, and attend our webcast

Our experts will be watching the Autumn Statement with great interest, visit our dedicated hub on 17 November for insight and instant reaction. We will also be hosting a webcast on 18 November from 9-9:45am, where our expert panel will discuss the announcements in detail. Register to secure your place.

Get in touch directly for a discussion

The coming weeks promise to be significant for individuals and businesses, if you would like to discuss points covered in the Autumn Statement, please get in touch.