Initor Global Guide to the Chancellor’s 2023 Autumn Statement

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The Chancellor of the Exchequer (Jeremy Hunt) delivered his Autumn Statement to Parliament on 22 November 2023, setting out the government’s plans for tax and spending for the 2024 fiscal year and beyond. The statement contains 110 new measures with implications for the finances of businesses, individuals, and taxpayers. This blog highlights the key announcements, with a particular focus on information accountants may need in advance of the new tax year from April 2024. It is not a complete guide to the Autumn Statement. If you require the full text of the Chancellor’s Statement and supporting documents, please check the GOV.UK website.

Personal Tax

Income Tax Rates and Thresholds from 6 April 2024 (2024/25 tax year)

There are no changes to income tax rates or thresholds for the 2024/25 tax year. For taxpayers in England, Wales, and Northern Ireland the following continue to apply from 6 April 2024.  In previous announcements the government has said these amounts will apply until April 2028, though future budgets and Autumn Statements may require changes.

Band Threshold Tax Rate
Tax free amount (personal allowance) £12,570 0
Basic Rate £12,571 – £50,270 20%
Higher Rate £50,271 – £125,140 40%
Additional Rate Over £125,140 45%

Where annual income exceeds £100,000, the personal allowance reduces at a rate of £1 for every £2 of income above £100,000. The entire personal allowance is eliminated when income exceeds £125,140.

Scottish Income Tax Rates and Thresholds announced on 19 December 2023

The Scottish government operates an income tax regime which means anyone resident in Scotland pays different income tax rates and uses different bands and thresholds compared to the rest of the UK. On 19 December 2023, the Scottish Government increased the top rate of tax and introduced a new ‘advanced’ tax band for those earning between £75,000 and £125,140. For the 2024/25 tax year, Scottish income tax bands, thresholds and rates are as follows.

Band Threshold Tax Rate
Tax free amount (personal allowance) £12,570 0
Starter Rate £12,571- £14,876 19%
Scottish Basic Rate £14,877 – £26,651 20%
Intermediate Rate £25,652 – £43,662 21%
Higher Rate £43,663 – £75,000 42%
Advanced Rate (NEW) £75,001 – £125,140 45%
Top Rate Over £125,140 48%

As in the rest of the UK, where annual income exceeds £100,000, the personal allowance reduces at a rate of £1 for every £2 of income above £100,000. The entire personal allowance is eliminated when income exceeds £125,140.

National Insurance Rates and Thresholds

The Chancellor announced changes to the main rates of National Insurance Contribution (NICs) for employees and the self-employed, and a simplification of the tax system by abolishing Class 2 NICs.

The following paragraphs contain some of the headline rates for accountants, for a full list of national insurance rates and thresholds, please check the GOV.UK website (Autumn Statement 2023 – Overview of tax legislation and rates – Annex A).

The employment allowance continues at the current level of £5,000 per employer.

Employers and employee’s national insurance

The Chancellor confirmed the main rate of NICs for employees is to be cut from 12% to 10%, with the changes being implemented from 6 January 2024. The thresholds for the main NIC rates are as follows for employers and employees:

Threshold   Per week Per month Per annum
Lower Earnings limit Below this limit employees do not pay NICs £123 £533 £6,396
Primary Threshold (PT) Employees start paying NIC between PT and UEL at 10% from 6 January 2024 £242 £1,048 £12,570
Secondary Threshold Employers start paying NIC at 13.8% £175 £758 £9,100
Upper Earnings Limit (UEL) Above the UEL employees pay NIC at 2% £967 £4,189 £50,270

Self-employed national insurance

The main rate of Self-employed National Insurance (Class 4 NICs) is being reduced from 9% to 8% from 6 April 2024, At the same time, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension. This tax simplification effectively abolishes Class 2 NICs.

Self-employed people with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs. Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to access contributory benefits including the State Pension, can still do so. The weekly rate remains at £3.45 for the 2024/25 tax year.

The relevant limits and NIC rates for the self-employed are shown in the table below.

Small profits threshold (per year) £6,725
Lower Profits Limit (per year)
Self-employed people start paying Class 4 National Insurance at 8%
£12,570
Upper Profits Limit (per year) £50,270
Rate between Lower Profits Limit and Upper Profits Limit 9%
Rate above Upper Profits Limit 2%
Class 1A/1B NIC (paid by businesses on employee benefits) 13.8%

Individuals can pay voluntary class 3 NICs should they wish to address gaps in their national insurance record and enhance their state pension. The weekly class 3 rate will remain at £17.45 for the 2024/25 tax year.

Dividend Tax and allowance

The tax-free dividend allowance amount is reduced to £500 from April 2024. The amount of tax to pay on dividends above the dividend allowance depends on your Income Tax band. The Chancellor has not changed the rate of tax to be paid which is as follows:

Basic rate 8.75%
Higher rate 33.75%
Additional rate 39.35%

Tax on savings

No changes were made to the threshold for paying tax on savings interest which remains at £5,000. The personal savings allowance for basic rate taxpayers remains at £1,000 and for higher rate taxpayers the amount remains at £500.

Tax-Free Individual Savings Accounts (ISAs)

From April 2024, individuals can open multiple ISAs of the same type. The ability to open a new ISA in the same tax year could help maximise usage of the £20,000 yearly ISA allowance, which remains unchanged.

National Living Wage

From 1 April 2024, the government will increase the National Living Wage £11.44 per hour. The rate now applies to anyone aged 21 years and over (was previously 23 years and over).

Off-payroll working rules (IR35)

No changes have been made to the off-payroll working rules. The IR35 reforms introduced by the government in 2017 and 2021 continue to apply. This means medium and large sized businesses who engage a contractor working through an intermediary (such as a personal service company) are responsible for determining the IR35 status of the engagement.

Capital Gains Tax

The Chancellor announced the annual exempt amount for capital gains is £3,000 from April 2024.

Pensions reform

As previously announced, the lifetime pension allowance will be abolished from April 2024. The pension annual allowance increased from £40,000 to £60,000 from April 2023. Money purchase annual allowance increased from £4,000 to £10,000, which applies if you have already started drawing a pension.

The government will launch a consultation to allow individuals to have contributions paid into their existing pension scheme when they change employment. Whilst a simplification measure for individuals, this may present an administrative challenge to small businesses.

Inheritance Tax (IHT)

No changes were made to the inheritance tax (IHT) threshold. The ‘nil-rate band’ – the amount that can be passed on before IHT is due at a rate of 40% – will stay at its current rate of £325,000 until April 2028.

Requirements to file a Self-Assessment tax return – PAYE income only

The government will no longer require individuals with income taxed only through PAYE to file a Self-Assessment return from the 2024/25 tax year.

Making Tax Digital for Income Tax Self-Assessment (ITSA)

The Chancellor announced changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). This includes maintaining the current MTD threshold at £30,000 and design changes to simplify and improve the system. These changes will take effect from April 2026. The government is also legislating in the Autumn Finance Bill 2023 to ensure taxpayers, who join MTD from 6 April 2024, are subject to the government’s new, fairer penalty regime for the late filing of tax returns and overdue payment of tax.

Company Tax

 Corporation Tax

No changes were made to Corporation Tax rates, which remain at 25% for companies with profits over £250,000. The Small Profit Rate of 19% continues for companies with profits less than £50,000. The corporation tax rate on profits between £50,000 and £250,000 is tapered up to 25% using marginal relief calculations.

Research and Development Tax Relief (‘R&D’ tax relief)

The government announced that the intensity threshold in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%. A one-year grace period will be introduced so that companies under the 30% qualifying R&D expenditure threshold will continue to receive relief for one year.

Businesses will be able to claim for expenditure incurred from 1 April 2023 once the Autumn Finance Bill 2023 has received Royal Assent, with the reduction in intensity threshold and grace period coming into effect for accounting periods beginning on or after 1 April 2024.

The existing Research and Development Expenditure (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. The notional tax rate applied to loss-makers in the merged scheme is redcued from 25% as per the current RDEC scheme, to 19%.

The following levels of tax for expenditure incurred on or after 1 April 2023 will continue:

  • the small and medium-sized enterprises (SME) additional deduction is 86%
  • the SME credit rate is 10%
  • R&D expenditure credit is 20%.

Full expensing deduction

The new ‘Full Expensing’ deduction announced from 1 April 2023 and originally intended to last until 31 March 2026 will be made permanent through legislation in the Autumn Finance Bill to remove the 2026 end date. The relief allows companies to claim 100% first-year deduction from profit before tax (50% for special pool rate) on qualifying new main-rate plant and machinery investments.

Value Added Tax

No changes were made to the rates of VAT individuals pay or the registration level for businesses, which remains at £85,000 until 2026.

Vehicle Excise Duty (VED)

The government will increase VED rates for cars, vans, and motorcycles in line with RPI from 1 April 2024 in the Autumn Finance Bill 2023.

 Annual Investment Allowance

The Annual Investment Allowance remains at £1 million.

Disclaimer

This blog draws on information published by HMRC and other professional bodies. It is not a complete guide to the 2023 Autumn Statement. Information may be subject to change when the Finance Bill 2023 is discussed by Parliament and Initor Global accepts no responsibility should you decide to rely on the information we have published in this blog. Professional advice should always be taken as necessary based on your individual circumstances.