Autumn Statement 2023

Information correct as of 22 November 2023

Yesterday, Chancellor Jeremy Hunt delivered his Autumn Statement, which was in contrast to the sobering ‘state of the economy’ statement he gave this time last year. Since last year, inflation has fallen to 4.6%, more than half that at the same time last year, and this has handed the Chancellor a windfall of around £26 billion to play with, giving him the opportunity to turn his attention to cutting taxes.

With the Conservatives aware of the upcoming general election, Mr. Hunt suggested a raft of 110 growth measures that will be put in place to encourage business investment and stimulate the economy. In addition, to appease the individual taxpayer, the Chancellor reduced National Insurance rates but did not go further by increasing personal allowances or tax rate bands, which remain static.

Mr Hunt ended his speech by stating, “We are delivering the biggest business tax cuts in modern British history. The largest ever cut to employee and self-employed national insurance and the biggest package of tax cuts to be implemented since the 1980s. An Autumn Statement for a country that has turned a corner”.

However, notably Inheritance Tax and SDLT changes mooted in the press were absent, and these may be being kept back until the Spring Budget or as an election manifesto headline ahead of the upcoming General election.

We have sifted through the details and hope the following highlights, which we feel will be the most significant to our clients, will be helpful.

Business Taxes

Corporation Tax – there has been no change to the rates of corporation tax (main rate of 25% for companies with profits in excess of £250,000 and 19% for smaller companies with profits of less than £50,000 with a marginal rate of 26.5% in between these amounts).

Capital Allowances – “full expensing” for companies was introduced at the Spring Budget 2023.  This was intended to last for three years from April 2023, allowing businesses to write off the full cost of qualifying plant and machinery investment against their taxable profits.  Full expensing will be made permanent with a 100% first year allowance for main rate assets and 50% first year allowance for special rate (including long life) assets.  This is together with the £1m annual investment allowance being available on non-qualifying assets.

Business Rates – a business rates support package worth £4.3bn over the next five years to support small businesses and retail, hospitality and leisure (RHL). This includes an extension of RHL business rates relief for a further year.  From April 2024, eligible RHL businesses may obtain 75% relief up to a cash cap of £110,000 per business. In addition, the small business multiplier was frozen for a fourth consecutive year (at 49.9p). The standard rate multiplier will be increased in line with September’s CPI inflation to 54.6p.

Research & Development – the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 to be claimed in the merged scheme with a rate of 20% on offer. It was also announced that under the new scheme design, loss-making companies would be subject to a lower notional tax thereby increasing the net benefit of the repayable credit.

The Government will also stop payments being made to third parties, save in very limited circumstances.  Instead, payments will be made direct to the claimant company.  This is aimed at tackling non-compliance.

Further reforms to simplify R&D are expected.

Freeport and Investment Zones – Investment Zone tax reliefs in England are to be extended from five to ten years (with announcements regarding Scottish and Welsh zones to follow).  Three new zones were announced in Greater Manchester, West Midlands and East Midlands. Within these zones, companies undertaking eligible activities should benefit from a 100% first-year allowance on expenditure on qualifying plant and machinery assets for use in designated tax sites. This represents an uplift on the 50% first year allowance for special rate expenditure available under the “full expensing” regime. In addition, a “structures and buildings allowance” of 10% per annum (usually 3%) on qualifying expenditure will also be available.

In both cases, Freeport and Investment Zones, relief for employer’s NICs currently available on the earnings of eligible new employees that start by 5 April 2026 will continue to apply for 36 months per employee, within the extended window to 30 September 2031.

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) – legislation will be introduced to extend the lifetime of these reliefs to 2035 as they were due to expire in 2025.

Enterprise Management Incentives (EMI) – currently, companies have to notify HMRC within 92 days of granting an EMI the option. This deadline will be extended to 6 July following the tax year in which the options were granted.

Annual Tax on Enveloped Dwellings (ATED) – ATED annual charges will be increased by 6.7% from 1 April 2024.

Alcohol Duty – alcohol duties will be frozen until 1 August 2024.  The Government will announce its annual uprating decision in Spring Budget 2024.

VAT

The Chancellor announced that the VAT zero rate that applies to the installation of energy-saving materials will be extended to additional technologies (e.g. water-source heat pumps), and to include buildings intended solely for a relevant charitable purpose.  The implementation date is 1 February 2024, with the reduced rate of VAT reverting on 1 April 2027.

Personal Taxes

National Insurance Contributions (NICs) – the most pronounced measures in the Autumn Statement were made with regard to NICs.  There were changes made for employees and the self-employed.

Employees’ NICs: The main rate of Class 1 employee NICs will be reduced from 12% to 10% from 6 January 2024. This will apply to earnings between £12,570 and £50,270 per annum.  This change is being made during the current tax year, in less than two months, which will require software providers and employers to update their systems imminently.  The rate of Employer NICs was not changed, and remains 13.8%.

Self-employed NICs: Class 2 NICs will be abolished from 6 April 2024 (currently paid at a flat rate of £3.45 a week by the self-employed with profits above £12,570). Access to contributory benefits, including the State Pension will be maintained. Those with profits under £6,725 who choose to pay Class 2 NICs voluntarily to get access to contributory benefits, including the state pension, will continue to be able to do so.  The rate is to be frozen at £3.45 per week.

The rate of Class 4 NICs, paid by the self-employed on earnings between £12,570 and £50,270 will be reduced from 9% to 8% from 6 April 2024.

Making Tax Digital (MTD) – MTD has been subject to several delays, but it is due to commence for those with business or property income of over £50,000 (gross) from April 2026.  Those with income of between £30,000 and £50,000 (gross) will follow in April 2027.  The Autumn Statement confirmed that those with income under £30,000 (gross) will not be brought into MTD, although this is subject to review.  The requirement for taxpayers to submit an End of Period Statements (EOPS) each quarter is also being removed.

Income Tax Rates and Thresholds – There have been no changes to income tax thresholds or rates.

Van Benefit Charge, and Car and Van Fuel Benefit Charges – the van benefit charge as well as the car and van fuel benefit charges remain unchanged at the current level for 2024/25.

National Minimum and Living Wage – From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over.

Pension Triple Lock – the Government will maintain the “triple lock”.  From April 2024, the full new state pension will increase by 8.5% (to £11,500 per year).

Capital Taxes – Capital Gains Tax and Inheritance Tax – despite much press speculation before the Autumn Statement, no changes were announced with regard to inheritance tax or capital gains tax.

Cash Basis – the Government will expand and simplify the income tax cash basis for the self-employed and partnerships from 6 April 2024.  The cash basis will become the default calculation method, with an opt-out required to use the alternative “accruals” basis.  Currently businesses are currently unable to join and remain within the cash basis if they breach certain turnover thresholds.  These turnover thresholds are to be abolished and so the scheme will become available to all eligible businesses with trading income.  Subsequent other changes are being made to improve the operation of the cash basis.

Self-Assessment and PAYE only individuals – individuals whose income is entirely taxed through “Pay As You Earn (PAYE)” will be removed from a requirement to file annual self-assessment tax returns.  Individuals who have income of £150,000+ are currently required to submit tax returns even if all of that income is taxed under PAYE.  From April 2024, these taxpayers will be removed of the requirement to submit annual tax returns.

ISAs – several changes to ISAs were mentioned in the Autumn Statement.  The Government will allow multiple subscriptions to ISAs of the same type every year from April 2024 and partial transfers of ISA funds in-year between providers will be allowed from April 2024.  Other changes were also announced.  Subscription rates will remain the same at £20,000 for ISAs, £9,000 for Child Trust Funds and Junior ISAs and £4,000 for Lifetime ISAs.

As always, the information outlined above is for general guidance purposes only. We appreciate that every individual and business have different circumstances and you should always seek appropriate professional advice before you act, or refrain from acting, on any of the information provided.

If you would like more information on anything announced in the budget or require wider business or planning guidance, please do get in touch or contact the GWA Partner who looks after your affairs.