The Chancellor of the exchequer delivered the UK Autumn statement on the the 22nd of November.
Below is our summary of the key points from the Chancellor’s announcements in the Autumn Statement 2023 which will impact UK business owners, contractors, self-employed and charities.
Business Tax
Firstly, ‘full expensing’ is to be made permanent, rather than ceasing on 31 March 2026. Full expensing allows companies to claim tax relief for 100% (or 50%, for certain categories) of qualifying capital expenditure in the year in which it is incurred. This measure is helpful for large companies, but businesses with annual qualifying capital spend under £1m already benefit from a 100% ‘Annual Investment Allowance’ (AIA) which has a similar effect. Unlike full expensing, the AIA is also available to unincorporated businesses.
R & D Tax Relief
The Chancellor announced the creation of a new simplified R & D Tax relief, which combines the existing R & D expenditure credits with SME schemes from April 2024. There will be further reforms to research and development (R&D) reliefs. These are to come into effect in April 2024.
Business rates relief at 75% for retail, hospitality and leisure businesses in England will continue for another year, until 31 March 2025. The relief is worth up to £110,000 per business each year; as well as shops and restaurants, it is available to businesses such as hotels and gyms, cafes and pubs, and cinemas and music venues. Also, the business rates multipliers (used to calculate business rates) will be frozen at their current levels until 31 March 2025.
National Insurance for the Self- employed:
From 6 April 2024, Class 4 NIC on business profits between £12,570 and £50,270 is to be reduced from 9% to 8% – a saving of up to £377 in 2024–25. Secondly, compulsory Class 2 NIC (currently a flat rate of £3.45 per week) will be abolished from 6 April 2024. Although Class 2 NIC is abolished but it will remain in place for self-employed whose profits fall below necessary thresholds but would like to pay voluntarily.
There is a 2% cut in employee NIC Autumn Statement 2023 Report, but this is not mirrored by any cut in employer NIC. This will remain at 13.8% in 2024–25.
Cash Basis Regime
The cash basis regime is to be extended (I.e. a business’ taxable profit will be the total amounts of receipts less the total payments of allowable expenses subject to adjustments) as follows:
removal of the turnover thresholds for businesses;
setting the cash basis as the default method of calculating taxable profits, with an opt-out for accruals;
removal of the £500 limit on interest deductions; and
removal of the restrictions on using loss relief.
Car & Van fuel Benefit
Van benefit charge and the car and van fuel benefit charges will remain the same for 2024–25.
The rates are, and will remain, as follows: multiplier for determining level of car fuel benefit: £27,800; van benefit: flat rate of £3,960; and van fuel benefit: flat rate of £757.
Tax for individuals
From 1 January 2024, the main rate of employee Class 1 NICs will reduce from 12% to 10%. In addition, the Class 3 NIC rates will be frozen at £17.45 a week for 2024–25.
From 6 April 2024, the Government will make changes to individual savings accounts (ISAs) designed to simplify and widen the scope of investments which can be included. ISAs will also be moved onto a digital system. Enterprise investment schemes and venture capital trusts are to be extended to 2035 to ensure that growth capital continues to be available to early-stage innovative companies.
Legislation, coming into effect from 6 April 2024, will make changes to address the potential over-collection of tax and NICs where there has been non-compliance with the IR35 rules.
Pensions
Consolidation: The Chancellor announced some significant changes to pensions This includes facilitating the consolidation of both pension funds and pension pots.
The Government wishes to tackle the long-standing problem of ‘small-pot’ pensions and is launching a call for evidence on a lifetime-provider model that would allow individuals to have contributions paid into their existing pension scheme when they change employer, providing greater agency and control over their pension.
Management of Taxes
From 2024–25, individuals with an income of more than £150,000 which is taxed through PAYE will not be required to submit a self assessment return, unless they have another reason to do so
Other
Venture Capital Scheme
It was announced that the Government will introduce legislation in Autumn Finance Bill 2023 to extend the existing sunset clause for the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes from 6 April 2025 to 6 April 2035, thus ensuring the continued availability of both income tax and CGT reliefs for investors in relation to new shares issued on or after 6 April 2025.
Making Tax Digital
The MTD for ITSA regime will apply to self-employed individuals and landlords. They will be required to keep digital records on HMRC-compatible software, and submit quarterly updates of income and expenses to HMRC. These updates will not need to include tax adjustments, reliefs or allowances, and HMRC say that the software will manage much of the process. HMRC say MTD will help businesses to grow, cut the compliance burden after the year end, and minimise errors. MTD for VAT is already with us, but the introduction of mandatory MTD for ITSA has been delayed until April 2026 for those with income over £50,000, and a year later for those whose income is over £30,000. Mandatory introduction of MTD for those with income below £30,000 will be kept under review, but such businesses and landlords will be able to register voluntarily for MTD. HMRC say that they intend to introduce MTD for partnerships, but have not specified a date.
Business Rates
Business rates are paid on non-domestic properties, such as shops, offices, factories, pubs, holiday rental properties, and hotels. In England and Wales, rates are based on the rateable value, that is the open market rental value at 6 April 2021. A standard or small business multiplier is then applied.
Individual Savings Accounts (ISA)
As part of the measures announced at the Autumn Statement that will not be included in Finance Bill 2023 (but will be given effect by Statutory Instrument), the ISA, Child Tax Fund, and Junior ISA annual subscription limit will remain unchanged for 2024–25 at £20,000, £9,000 and £9,000 respectively, as will the Lifetime ISA subscription limit (£4,000).
Oil and gas
With a view to giving investors in the oil and gas sector more certainty, and in recognition of the vital role it plays in supporting the economy and UK energy security, Autumn Statement 2023 sees the announcement of a package of measures setting out the Government’s short, medium, and long-term plans to support investment in the sector through the tax regime.
Charities to receive VAT relief on energy-saving materials
A 5 percent VAT rate on the installation of energy-saving materials in buildings used ‘solely for relevant charitable purposes’ will be introduced in February.
The government will reintroduce VAT relief on energy-saving materials in buildings used for charitable purposes.
It means that equipment such as heat pumps will be eligible for a 5 percent VAT rate for installation in charity buildings in the UK from February.
Summary
Although there were no income tax cuts, changes to Capital Gains or Inheritance tax cuts, or stamp duty land tax cuts. There were still some things to cheer about, e.g. the cut in National Insurance.
