The 2023 Autumn Statement was delivered by Jeremy Hunt on Wednesday 22nd November 2023 where he announced a range of significant changes to ease the burden on tax payers in the UK. We discuss our highlights below;
Personal Taxes
Venture Capital Schemes: In an effort to promote private investment in smaller enterprises who face challenges in securing necessary funding for growth and development the enterprise investment scheme and venture capital trusts will be extended by an additional ten years, stretching their validity until April 2035.
Cash Basis: From April 2024, the cash basis will become the default method for small businesses, with various existing restrictions lifted. Businesses will have the option to elect into the accruals basis. Electing the cash basis means that you are only required to report income when it enters or leaves your business. Unfortunately this does not apply to limited companies or limited liability partnerships.
ISAs: Several proposed changes (primarily effective from April 2024) aim to simplify the scheme and scrap the single ISA limit. The government will also allow “certain” fractional shares as ISA investments, pending consultation.
National Insurance Contributions
Class 1: The primary NIC rate will undergo a reduction from 12% to 10%, effective from 6 January 2024 which translates to a £450 tax cut for the average person earning £35k per year.
Class 2 NICs: To be abolished, and the main Class 4 rate will be lowered to 8% of profits (down from 9%) starting 6 April 2024 which equates to a £350 tax cut for the average self-employed person earning £28k per year.
Business and Employment Taxes
Capital Allowances: Full expensing, which “is a capital allowance tax scheme that allows UK companies to deduct 100% of the cost of qualifying plant and machinery from their taxable profits in the year of purchase instead of spreading the cost across multiple tax years” – is set to become a permanent fixture, eliminating the previously scheduled expiry date of 1 April 2026.
R&D: In order to promote further research & development in the UK, a unified R&D scheme will be introduced from 1 April 2024. Loss-making companies within this merged framework will see a reduced tax rate, dropping from 25% to 19%. The threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, and nominations for R&D tax credit payments to third parties will be halted.
Freeports and Investment Zones: Special tax site reliefs for freeports and investment zones will be extended for an additional five years, running until 30 September 2031.
Indirect Taxes
Interpretation of VAT Law: This provision affirms that, in the context of VAT and excise law, aligned with the REUL Act, no segment of any UK Act of Parliament or domestic subordinate legislation can be annulled or set aside on the grounds of being incompatible with EU law. Additionally, it guarantees the continued interpretation of UK VAT and excise legislation in accordance with Parliament’s original intent, incorporating existing rights and principles applied in the interpretation of UK law.
Tax Administration
Making Tax Digital for Income Tax Self-Assessment: Taxpayers voluntarily signing up from April 2024 will be subject to a harmonized penalty regime for late filing and late payment. The Treasury plans several changes to MTD for ITSA, maintaining the 2026 and 2027 start dates. Draft regulations for consultation are anticipated by the end of 2023.
Real Estate
The mortgage guarantee scheme has been extended to June 2025, allowing first-time buyers to take out a mortgage on properties up to £600k with only a 5% deposit.
Other Announcements
National Minimum Wage: The full National Living Wage rate will rise to £11.44/hour (up from £10.42) from April 2024, extended to those aged 21 and over. The 18–20 year old rate will increase to £8.60/hour, and the apprentice rate to £6.40/hour.
Pensions: The full new state pension will see an 8.5% increase in April 2024, preserving the triple lock guarantee. The digitalization of relief at source is postponed, with the earliest implementation anticipated in April 2027.
Benefits (including Universal Credit): A 6.7% increase is slated for April 2024, based on the September 2023 inflation rate.
With the above changes being implemented, UK tax rates are said to reach the highest point in 70 years which means every penny counts. Get in touch with our tax advisors today to see where you can SAVE!