Yesterday, Jeremy Hunt, the new chancellor, scrapped most of September’s mini-budget tax measures prior to the full announcement of the Autumn Statement on 17th November.

To make it easier for you to understand how these changes will affect your R&D tax credit claim, we’ve gone through each key measure that could potentially impact your claim, explaining what the measure entails and if it’s been reversed or not.

Corporation Tax

In March 2021, Rishi Sunak stated that the rate of Corporation Tax would be increasing. The raise would take effect in April 2023, bumping the percentage up from 19% to 25%.

On 23 September, former chancellor Kwasi Kwarteng announced that it would stay at 19%, meaning that companies can keep more of their profits.

What is the latest and what does it mean for my R&D tax credit claim? 

On 14 October the new Chancellor, Jeremy Hunt, announced a reversal of this decision in the face of significant backlash. Corporation Tax will increase to 25%

How does this work in practice? 

Essentially, the rate of Corporation Tax you pay depends on how much profit your business makes:

  • For profits up to £50K, you’ll pay 19%, the same amount as before.
  • If your company’s profits are between £50K – £250K, you’ll pay 25% Corporation Tax. However, you may be eligible for ‘marginal rate relief’, depending on the specifics of your case. This could reduce your overall tax rate to anywhere between 19-25%. 
  • If your profits exceed £250K, you will pay the new increased Corporation Tax Rate of 25%. 

The knock-on effect is that the net benefit of the R&D Expenditure Credit (RDEC) which mainly applies to large companies, and which currently provides 13% of qualifying R&D expenditure in tax credits, will change. 

The credit received through the RDEC scheme is subject to Corporation Tax, so the increase of Corporation Tax from 19% to 25% from 1 April 2023 means that the net benefit of the tax credit available to large companies will reduce from 10.53% to 9.75%.

National insurance tax

The government announced in the mini-budget in September that they will reverse the 1.25% rise in National Insurance contributions that was implemented back in April. This means that both employees and employers will see a decrease in their rates come 6 November 2022.

The change to the National Insurance threshold that took effect in July will not change.

What is the latest and what does it mean for my R&D tax credit claim? 

The changes announced on 23 September 2022 are still going ahead. National Insurance contributions will revert to the level they were at before April 2022.

Health and Social Care Levy

The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as initially planned.

What is the latest and what does it mean for my R&D tax credit claim? 

Currently, there are no changes to what was announced on 23 September 2022. The abolition of this Levy is still going ahead. This means you won’t need to worry about the potential effects of the levy on your future R&D claims, unless there are further changes announced.

Get clarity around how future changes will affect your R&D claims

To help you navigate the impact of all these changes on your R&D claims, why not join our Autumn Statement webinar at 10 am on 24 November?  

Hosted by our Head of Client Success Max Glennon and Head of Tax Jon Yeomans, it’ll give you a clear picture of what’s happening and its impact on your R&D claims in just 45 minutes.

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