Autumn Statement 2022
Employment taxes and mobility
It’s quite clear employers and employees are being asked to pay their fair share towards delivering economic stability for the nation.
The measures announced today will increase further fast-rising payroll costs fuelled by inflation impacts on wages. A number of the measures are freezing allowances and exemptions, in some ways stealth rises. As expected, the tax benefits of electric vehicles are being slowly eroded. Mobility costs into the UK for multinational employers will also rise.
To discuss what this means for you and your business get in touch or speak to your usual Crowe contact.
Our tax team looks at the measures announced in the 2022 Autumn Statement.
Impact on employment taxes
These are the main measures affecting employers and employers:
- personal allowance and the 20% and 40% tax rate thresholds frozen
- the threshold for 45% rate payers reduced from £150,000 to £125,140
- Class 1 National Insurance Contribution (NIC) thresholds frozen
- employer’s allowance frozen at £5,000
- increases in company car and van benefit charges
- increases in the National Living Wage (NLW) rates from April 2023.
Freezing the personal allowances and NIC thresholds brings more lower paid employees within the tax and NIC regime. Some of the increase in the NLW rates may be lost to tax and NICs.
The reduction of the 45% threshold will mean those caught will pay approximately £1,243 per year in additional tax.
The NLW for people over 23 rises to £10.42 per hour from April 2023 alongside increases to the other rates.
Increases in company car and fuel benefits rates means additional tax and NICs for employees and employers. Freezing the employer's allowance, which reduces their NIC liability, does not provide any cushion against rising costs.
Low emission vehicles Benefit-in-Kind rates will increase to a maximum rate of 5% by 2026/27. Other company car drivers will see a 1% increase in 2025/26 to a maximum of 37%.
Vehicle excise duty on electric cars is to be brought in to line with other vehicles from April 2025 increasing cost for employers providing these.
The measures are in line with what we expected but will result in increases in both tax and NICs.
Back to top: Explore all Autumn Statement measures announced
Impact on global workforce
Threshold for 45% tax rate lowered from £150,000 to £125,140. The personal allowance and other rate bands are frozen until April 2028. Voluntary NICs paid by some UK outbounds have also increased.
Tax-free allowances on dividends cut from £2,000 to £500 by April 2024. Annual exempt amount for Capital Gains Tax will be cut from £12,300 to £3,000 by the same time.
Reduced thresholds and frozen rates and allowances during a period of rising base salaries will increase employer tax costs for UK inbound tax equalised (TEQ) employees. Outbound TEQ employees will need to have their hypothetical taxes revisited by April 2023 to reflect lower net pay for those earning more than £125,140. Higher hypothetical taxes should mean lower host taxes.
Hypothetical taxes for UK outbound employees will need to be revisited before April 2023.
NIC voluntary increase will be noteworthy for cases where voluntary Class 2 are being made.
There will be increased costs for employers with tax policies that settle UK taxes on non-company income and gains.
No VAT on private school fees will help maintain costs where this is an assignment benefit for mobile executives. No change to ‘non-dom’ rules for now will be welcomed by many. High-wage, talent-rich economy focus will attract talent to the UK.
Real-time reduction in foreign aid may impact grants to Non-Governmental Organisations (NGOs) and limit their resourcing overseas.
Employers should review their UK touching mobility cost basis and revisit hypothetical tax calculations for outbounds.
Back to top: Explore all Autumn Statement measures announced
