The UK’s Digital Services Tax (DST) raised £358 million from large digital businesses in the 2020/21 tax year, according to data published by the National Audit Office (NAO).

The DST was introduced in April 2020 to combat the government’s fears that the international tax system ‘did not recognise the value being generated for digital companies through UK online users’. The tax targets firms that make large revenues from UK users of social media platforms, online search engines and online marketplaces.

The NAO found that HMRC collected 30% more DST in its first year than originally predicted. It said that most firms that are liable for the tax now pay more in DST than corporation tax.

Gareth Davies, Head of the NAO, commented:

‘The DST has succeeded in raising more tax from some big digital companies and has brought in more money than forecast in its first year. However, HMRC could still face challenges enforcing compliance, especially among groups without a physical presence in the UK.

‘It should ensure that big digital companies operating beyond the UK’s borders are aware of the tax and comply with it.’

Internet link: NAO website

The UK’s tax burden will rise after Chancellor Jeremy Hunt reduced the threshold on the top rate of tax and announced freezes on other taxes in the Autumn Statement.

The threshold for the top 45% additional rate of income tax was cut to £125,140 from £150,000.

The government is also fixing other personal tax thresholds within income tax, NICs and inheritance tax for an additional two years, until April 2028.

The Dividend Allowance will be reduced from £2,000 to £1,000 next year and £500 from April 2024.

In addition, the capital gains tax exemption will be reduced from £12,300 to £6,000 next year and then to £3,000 from April 2024.

As energy prices continue to drive inflation, the Chancellor confirmed that the Energy Price Guarantee will be extended for a year from April 2023. However, the level at which typical bills are capped will increase to £3,000 a year from £2,500.

The windfall tax on the profits of oil and gas firms was increased from 25% to 35% and extended until March 2028.

The Chancellor also announced a £13.6 billion package of support for business rates payers in England. To protect businesses from rising inflation, the multiplier will be frozen in 2023/24, while relief for 230,000 businesses in the retail, hospitality and leisure sectors was also increased from 50% to 75% next year.

Mr Hunt also confirmed the National Living Wage (NLW) will rise from £9.50 to £10.42 an hour, while the triple lock on state pensions was protected.

The Chancellor said:

‘There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.’

Internet links: GOV.UK

The Confederation of British Industry (CBI) praised Chancellor Jeremy Hunt for ‘delivering stability and protecting the most vulnerable‘ in the Autumn Statement.

The business group welcomed the freeze in business rates and extra support for those facing higher bills. Additionally, it said that staying the course on R&D spending and major infrastructure will give a boost to communities and the country.

However, the CBI also warned the government that many businesses will ‘think there’s more to be done on growth’. It stated that stabilising the public finances ‘inevitably means difficult decisions have to be taken’, and that businesses will consider a freeze in the national insurance contribution (NIC) thresholds and additional windfall taxes as ‘the sharpest stings in the tail’.

Rain Newton-Smith, Chief Economist at the CBI, said:

‘The Autumn Statement lays down an important marker for the direction of the country. Business will work with government to turn [the] ambitions into a serious plan for growth that can lift us all out of the current crisis.’

Internet links: CBI website

Chancellor of the Exchequer Jeremy Hunt has delayed the announcement of the government’s economic plan until 17 November.

The Medium-Term Fiscal Plan was due to be delivered by the Chancellor in the Commons on 31 October, along with a forecast from the Office for Budget Responsibility.

This had been brought forward because of the market turmoil that followed September’s Mini Budget.

But it will now be put back by more than two weeks and be turned into a full Autumn Statement – expanding its remit and providing longer term plans.

The delay followed the reversals of most of the measures announced in the recent Mini Budget.

Mr Hunt announced that the following tax policies will no longer be taken forward:

• cutting the basic rate of income tax to 19% from April 2023. The basic rate of income tax will remain at 20% indefinitely.
• cutting dividend tax by 1.25 percentage points from April 2023. The 1.25 percentage point increase, which took effect in April 2022, will remain in place.
• repealing the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. The reforms will remain in place.

The changes follow decisions not to proceed with proposals to remove the additional rate of income tax and to cancel the planned rise in the corporation tax rate.
Mr Hunt said:

‘Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way. But it is also extremely important the statement is based on the most accurate possible economic forecasts and forecasts of public finances.’

Internet links: GOV.UK