Autumn Statement – 22 November 2023

The Chancellor presented his Autumn Statement to the House of Commons on 22 November 2023. For once, there were few surprises and the principal measures were those that had been leaked in advance to the press. We were, perhaps, not expecting the fall in employee National Insurance to be 2 percentage points, or that it would come in from January 2024. There is, possibly, room for a further ‘tax cutting’ Budget in March 2024 in which proposals on Income Tax or Inheritance Tax are brought forward in advance of a likely 2024 election. As always, please let us know if you have any queries about the measures announced or your own position.

This summary has been prepared very rapidly and is for general information only. You are recommended to seek professional advice before taking or refraining from taking action on the basis of the contents of this publication. The guide represents our understanding of the law and HM Revenue & Customs practice as at 23 November 2023, which are subject to change.

HIGHLIGHTS

• The main rate of class 1 employee national insurance contributions (NICs) will be reduced from 12% to 10% with effect from 6 January 2024. The main rate of class 4 self-employed NICs will be cut from 9% to 8% from 6 April 2024. There will no longer be an obligation to pay class 2 NICs.
• Full expensing of investments made by companies in qualifying plant and machinery will be made permanent and will therefore continue after April 2026.
• The main income tax allowances and thresholds, the main NICs thresholds plus the inheritance tax (IHT) nil rate bands will stay at their current levels for 2024/25.
• The state pension as well as pension credit will rise by the full triple lock increase of 8.5% for 2024/25. Universal credit and most other benefits will increase by 6.7%.
• Investors will be allowed to make multiple subscriptions to ISAs of the same type each year from April 2024, when partial transfers of ISAs between providers will also be permitted.
• The national living wage will increase to £11.44 an hour and the rate is extended to 21-year-olds.
• All alcohol duties have been frozen until August 2024.
• The government is seeking to persuade people with health conditions to find work. There is extra funding, as well as new sanctions for those who are found to be able to work but refuse to look for employment.

PERSONAL TAX

Income tax

The personal allowance will remain at £12,570 for 2024/25 and the higher rate threshold will stay at £50,270, both levels that first took effect in 2021/22. The blind person’s allowance will be increased to £3,070 for 2024/25.

The 45% additional rate threshold will stay at £125,140. In Scotland, the intermediate, higher and top (additional) rate thresholds for non-savings, non-dividend income will be announced in the Scottish Budget, to be published on 19 December.

Dividend tax

The dividend allowance will be halved to £500 for 2024/25 as already announced.

Income tax for trusts and estates

The standard rate band for trusts will no longer apply in 2024/25, as previously announced and legislated. Instead, trusts with income of £500 or less will have no tax to pay. Where a settlor has created more than one trust, the threshold amount will be £500 divided by the total number of existing trusts, subject to a £100 minimum. If the threshold is exceeded, trust tax rates apply to all income.

There will be no tax for estates where the income does not exceed £500. In such circumstances, estate income paid to beneficiaries will also be free of tax.

National insurance contributions (NICs)

From 6 January 2024 the class 1 primary (employee) contributions rate on earnings between £12,570 and £50,270 will be cut by 2% to 10%. The 2% rate on earnings above £50,270 will remain unchanged.

The class 1 primary threshold and class 4 lower profits limit will remain aligned with the personal allowance (£12,570). The upper earnings limit and class 4 upper profits limit will remain aligned with the higher rate threshold at £50,270 through to April 2028. The lower earnings limit (£6,396) and the small profits threshold (£6,725) will remain unchanged in 2024/25.

From 6 April 2024, class 2 contributions will no longer be required from the self-employed. However, those with profits below £6,725 (unchanged) who wish to retain access to contributory benefits (e.g. state pension) will continue to have the option to make voluntary contributions.

From the same date, the class 4 contribution rate on profits between £12,570 and £50,270 will be reduced by 1% to 8%. The 2% rate on profits above the upper limit will be unchanged.

The voluntary class 3 rate will be unchanged at £17.45 a week for 2024/25.

Pay as you earn (PAYE) – self assessment

Individuals with income taxed only through PAYE will no longer be required to file a self assessment return from 2024/25.

Off-payroll working (IR35)

HMRC will be able to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules.

Company cars and vans

The benefit-in-kind appropriate percentages for all cars will remain unchanged for 2024/25. Car and van fuel benefit charges and the van benefit charge will also remain at 2023/24 levels.

Capital gains tax

The annual exempt amount for individuals and personal representatives will be halved to £3,000 in 2024/25, as previously announced. The annual exempt amount for most trusts will be cut to £1,500 (minimum £300).

Inheritance tax

The nil rate band for 2024/25 will remain at £325,000, which was the level first set in 2009/10. The residence nil rate band (RNRB) will likewise stay at £175,000 and the RNRB taper will continue to apply where the value of the deceased’s estate is greater than £2 million.

Stamp duty land tax (SDLT)

The SDLT bands for residential property in England and Northern Ireland will remain unchanged until 1 April 2025. From that date, the 0% band threshold will be halved to £125,000 and a 2% rate applied between £125,000 and £250,000.

Enveloped dwellings (ATED)

The annual chargeable amounts for the ATED will be increased by 6.7% for 2024/25.

State pensions and social security benefits

The basic state pension, new state pension and pension credit standard minimum guarantee will be increased by 8.5% in April 2024, in line with May to July earnings growth under the triple lock provisions. All other UK-wide benefits will increase by 6.7% from April 2024.

Local Housing Allowance rates in Great Britain will be raised to the 30th percentile of local market rents in April 2024. At present they are based on April 2020 rental levels.

Pensions

Nine documents were published relating to the pensions framework. These included calls for evidence on a lifetime provider model to allow individuals to move towards having one pension pot for life and also on the creation of a ‘public consolidator’ for defined benefit schemes, to be run by the Pension Protection Fund.

Additional tax-related papers were issued about amending the relief at source arrangements, as previously proposed, and clarifying the impact of the abolition of the lifetime allowance from 6 April 2024.

Individual savings accounts (ISAs)

Various reforms were announced for ISAs. From April 2024:

• Investors will be allowed to make multiple subscriptions each year to ISAs of the same type.
• Partial transfers of ISA funds in-year between providers will be allowed.
• There will no longer be a requirement to reapply annually for an existing dormant ISA.
• The Innovative ISA will be expanded to allow investment in Long-Term Asset Funds and open-ended property funds with extended notice periods.
• The minimum account-opening age for adult ISAs will be harmonised at 18, removing the current cash-only adult ISA for 16 to 17-year-olds.
• Contribution limits will be unchanged.

The government will engage with providers about permitting certain fractional shares contracts as eligible ISA investments.

Venture capital schemes

The sunset clauses for the enterprise investment scheme (EIS) and venture capital trusts (VCTs) will be extended from 6 April 2025 to 6 April 2035.

BUSINESS TAXES

Capital allowances: full expensing

Full expensing, which was originally due to expire on 31 March 2026, is to be made permanent. This allows companies incurring qualifying expenditure on the provision of new plant and machinery to claim a 100% first-year allowance for main rate expenditure and a 50% allowance for special rate expenditure.

Expenditure on plant and machinery for leasing remains excluded, but the government will consult on a potential removal of this exclusion. The government will also consult on wider changes to simplify capital allowances legislation.

Research and development (R&D) tax reliefs

The R&D expenditure credit and the small or medium enterprise (SME) schemes will be merged for accounting periods beginning after 31 March 2024. The rate under the merged scheme will be 20% and the notional tax rate applied to loss-makers will be the corporation tax small profit rate of 19%.

The enhanced support for R&D-intensive SMEs will continue. The intensity threshold for the level of R&D expenditure required to qualify for enhanced support will be reduced from 40% to 30% from 1 April 2024. Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition of R&D intensity.

For claims made after 31 March 2024, the use of nominations for R&D tax credit payments will be removed, meaning that payments must go directly to the claimant company.

Creative industries

The government intends to increase the generosity of the Audio-Visual Expenditure Credit for visual effects expenditure and will work with the industry on how best to design this with the intention of implementing changes from April 2025.

Business rates

The small business multiplier will be frozen for another year and the 75% relief for retail, hospitality and leisure properties will be extended for 2024/25. The standard multiplier will be uprated by 6.7%.

Investment zones

The investment zones programme will be extended from five to ten years. New investment zones have been announced in Greater Manchester, the West Midlands and the East Midlands, with specific focuses. There will also be two investment zones in Wales: in the Cardiff and Newport area and the Wrexham and Flintshire region.

Freeport tax reliefs

The sunset date for the freeport tax reliefs will be extended to 30 September 2031 for freeports in England, conditional on agreement of delivery plans. For freeports in Scotland and Wales the reliefs will be extended from five to ten years, subject to agreement with the devolved administrations.

Making tax digital (MTD)

The £30,000 threshold for MTD for income tax self assessment will remain. This means people with gross income from self-employment and property below this threshold will not have to file tax returns using MTD. Foster carers and people unable to get a national insurance number will also be exempt.

The government will also simplify the requirements for all taxpayers providing quarterly updates and for taxpayers with more complex affairs, such as landlords with jointly-owned property. An end of period statement will no longer have to be provided.

Cash basis

The income tax cash basis will be expanded for self-employed individuals and partnerships from 6 April 2024. The cash basis will become the default method for small businesses and the current turnover, interest and loss relief restrictions will be removed.

Training costs for self-employed people

HMRC will rewrite guidance about the tax deductibility of training costs for sole traders and the self-employed to provide more clarity to business on what costs are deductible.

VAT: energy-saving materials

VAT relief on the installation of energy-saving materials will be extended to additional technologies, such as water-source heat pumps. Buildings used solely for a relevant charitable purpose will be brought within scope. The changes will take effect from February 2024.

Construction industry scheme (CIS)

Compliance with VAT obligations will be added to the CIS gross payment status test. HMRC will also gain extended powers to remove gross payment status immediately in cases of serious non-compliance involving VAT, income tax and corporation tax self assessment and PAYE. The majority of payments by landlords to tenants will be removed from the scope of the CIS. The changes will take effect from 6 April 2024.

Tax avoidance and fraud

It will become a criminal offence for promoters of tax avoidance to continue to promote schemes after receiving a Stop Notice requiring them to stop promoting schemes described in that notice.

HMRC will be able to bring disqualification action against directors of companies involved in promoting tax avoidance. The changes will take effect from the date of Royal Assent to Autumn Finance Bill 2023, together with the doubling of the maximum sentences for tax fraud to 14 years announced in the Spring Budget 2023.

Top-up tax

There will be amendments to the multinational and domestic top-up taxes to reflect recent internationally agreed guidance and make clarifications following consultations. The Undertaxed Profits Rule will be added to the multinational top-up tax for accounting periods beginning on or after 31 December 2024.

Planning

A new planning service will be introduced to speed up planning decisions. Applicants will have to pay the full cost of the process, which will be refunded if the planning authority does not meet the stated timescale. Some planning constraints will be removed to accelerate the expansion of electric vehicle charging infrastructure.