Autumn Statement 2023

Big money for business and pounds in the pockets of workers were the key headline items from the Chancellor's announcement.

The Autumn Statement 2023 included 110 measures for business and personal finance. We've pulled out the key announcements we feel may impact you and your business.

Personal

Business

Personal

National Insurance rates for self-employed and employed

• The Chancellor announced that the main rate of Class 1 employee NIC’s would be cut from 12% to 10% and that this will take effect from 6 January 2024. This means the average worker on £35,400 will be better off by over £450 in tax year 2024/25.
• In addition to this the Chancellor announced the abolition of Class 2 NIC from 6 April 2024 for the self-employed and a reduction of the main class 4 NIC rate from 9% to 8% from the same date, giving self-employed taxpayers a boost in the 2024/25 tax year.

In previous tax years, self-employed individuals have paid Class 2 NICs to receive access to contributory benefits including state pension. From 6 April 2024, if self-employment profits exceed £6,725 for the tax year, the individual will receive access to these benefits without the requirement to contribute via Class 2 contributions. Self-employed individuals whose profits do not exceed £6,725 will be able to get access to these benefits by making voluntary contributions.

As National Insurance is a UK wide levy on those working, these cuts benefit all parts of the United Kingdom, including the devolved regions.

Cash basis of assessment for unincorporated businesses

• The government has introduced changes which will allow more people to use the "cash basis" to calculate their trading profits. This means that they will not have to calculate accruals and sales are only taxed when cash is received. Under the changes, the cash basis will be the default method for calculating trade profits, but this will not apply to certain trading activities. You will be able to elect to prepare your accounts under traditional accounting methods if this is beneficial (or is required for banking purposes, for example). 
• Under the previous rules, there was a turnover limit of £150,000 for using the cash basis, but the turnover limit is being abolished. In addition, you could only claim a maximum of £500 of interest expense under the cash basis but this limit is also being scrapped. The changes will also allow sole traders to claim trading losses against other income (known as "sideways loss relief"). Previously, sideways loss relief was only available for sole traders who prepared traditional accounts. These changes are expected to be introduced from 6 April 2024 and will only affect the tax years 2024/25 and later.

Increase to the National Living Wage

• From 1 April 2024 this will increase to £11.44 an hour from its current £10.42. The age at which this applies has also been reduced from age 23 to age 21 and over, seeing a significant rise for those aged 21 or 22. For 18-20 year olds, the national minimum wage will increase to £8.60 an hour from 1 April 2024.

Apprenticeships

• A further £50 million is being committed to apprenticeships for a two-year pilot to stimulate training in growth areas.

Individual Savings Account (ISA) shakeup

The chancellor also announced increased flexibility to ISAs. From 6 April 2024, people will be able to subscribe to multiple ISAs of the same type every year, and to partially transfer ISA funds between different providers, making it easier for savers to switch providers.

It was also announced that they will be increasing the investment choice for holders of ISAs to enable investment in Innovative Finance and, going forward, to include investing in open-ended property companies. The opening age for ISAs from April 2024 will be age 18 and it was announced that all current ISA limits (see below) are frozen for 2024/25 tax year at the 2023/24 rates:

• ISA - £20,000
• Junior ISA - £9,000
• Lifetime ISA - £4,000 (excluding government bonus)
• Child Trust Fund – £9,000

Pension reforms

• Following on from the Spring Budget, the government will legislate in the Autumn Finance Bill to remove the Lifetime Allowance. This will give clarity to the taxation of lump sums and lump sum death benefit, as well as how various pension protections previously put in place to protect against reduced lifetime allowances will interplay with the abolition of the lifetime allowance. The changes will take effect from April 2024.
• Currently when you move from one job to another your new employer is required to pay into a pension scheme for you. The minimum they are required to contribute is 3% while you as the employee contribute a minimum of 5%. Your new employer will often have a set pension scheme which you will be added to and contributions into your previous pension scheme will cease. This can lead to building up multiple pensions over your working life, some of which may be very small.
• The government are now looking to tackle the issue of having multiple small pensions so have announced they want to look into giving employees the option to have their new employer contribute into their existing pension scheme, instead of being required to start a new scheme.
• Within pension schemes, the government also want to encourage investment into more innovative companies and by having a wider investment choice within pensions, it could have an impact on your long-term pension value.

Simplifying Making Tax Digital for Income Tax Self Assessment

• The government will shortly be announcing the outcome of its review on the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses.
• The outcome looks to retain the current MTD threshold at £30,000 of turnover and will set out some changes to simplify and improve the system.  Changes will take effect come April 2026 when MTD for ITSA begins to be rolled out. The Autumn Finance Bill will also include legislation that sees taxpayers who join MTD as volunteers from 6 April 2024, be subject to the government’s fairer penalty regime for the late filing of returns and payment of tax.

Relaxation of the requirement to complete a self-assessment tax return

• Those who only have income taxed through Pay As You Earn, are no longer required to file a tax return from 2024/25. Previously if you earned over £150,000 this would create a requirement to file a tax return.
• For those subscribing for shares in Enterprise Investment Scheme and in Venture Capital Trusts today’s announcements saw an extension to the existing sunset clauses whereby the tax relief obtained on these investments would end, extended from 6 April 2025 to 6 April 2035.

Business

Corporate Tax

• The primary announcement in the Autumn Statement 2023 was making permanent the first-year allowances, including Full Expensing at 100% for qualifying capital expenditure on Plant & Equipment.
• These reliefs will typically only benefit larger companies and those with large capital expenditure requirements. 
• Following recent (and anticipated) rates of inflation and taking into account the extension of the definition of “associated companies”, smaller companies and groups may find themselves falling within the Quarterly Instalment Payment regimes as we discuss in our blog following the Spring Budget 2023.

Innovation Taxes

• Additional compliance requirements will be introduced in respect of the creative industries and audio-visual tax reliefs. From 1 January 2024, an additional information form will be introduced, mandating the provision of specific information in support of all claims. 
• The draft audio-visual tax reliefs legislation contained provisions which would have restricted connected party costs to the actual expenditure incurred by the connected party. This will be updated to stipulate that the costs of goods or services provided between connected parties be restricted on an arm's length basis. Claimants will also have to disclose any connected party transactions. 

R&D Tax Relief

• The government are proceeding with their plan to merge the Research and Development Expenditure Credit (RDEC) and SME schemes. The merged scheme will apply to R&D expenditure incurred in accounting periods beginning or after 1 April 2024.

• A parallel regime based on the current SME relief will apply for “R&D intensive” SMEs, affording a higher rate of relief. R&D “intensity” for these purposes will be determined by R&D expenditure as a percentage of total expenditure, and the threshold will be reduced from 40% to 30%.

• A one-year grace period will also be introduced to prevent eligible companies that dip below the R&D intensive threshold for one year, from being immediately ejected from the R&D intensive SME regime. These changes will come into effect for accounting periods beginning on or after 1 April 2024.
• New rules will be introduced to address contract R&D situations, with the intention of ensuring the company making the decision to carry out the R&D and bearing the risk in relation to it, will be eligible to claim the relief. In practice, this will mean that large companies that had previously been unable to claim RDEC relief for subcontracted R&D (other than in limited circumstances) will be able to do so under the new merged scheme. It will also allow subcontractors to claim in a situation where the R&D activity is initiated by them at their own risk in relation to a contract for a customer. The detail of these rules is yet to be published.
• Restrictions on claiming for subsidised expenditure are to be removed completely, so that both SMEs and large companies can claim R&D relief, whether or not their expenditure is subsidised by grants or by contractual payments, provided other conditions are met.
• Changes are being made to the detailed calculation of relief within the merged RDEC regime, which will enhance the relief for loss-making companies.

Oil & Gas

• A technical note has been published explaining in detail how the end of the Energy Profits Levy (EPL) will come about, alongside the responses to the discussion note published in June. This confirms that the EPL will remain in place until its announced end date of 31 March 2028, unless oil and gas prices fall to historically normal levels for a sustained period. The EPL will permanently end if average oil and gas prices are at or below the Energy Security Investment Mechanism (ESIM) price thresholds for two consecutive quarters. The mechanism uses a 20-year historic average to the end of 2022 to arrive at the ESIM price thresholds.
• The other document published today for the oil and gas sector was the outcome and summary of responses of the Oil and Gas Fiscal Review. The primary message from this review was that the industry needs stability. The government is committing to undertaking regular engagement with the industry, including through a Ministerially chaired fiscal forum twice a year, so that any future changes to the fiscal regime are communicated and discussed in advance. The government also confirmed that it is considering a new mechanism that could be used to respond to price shocks post-2028, once the EPL has ended.

Freeports

• The window to claim Freeport tax reliefs will be extended from five to ten years, until September 2031 for Freeports in England, conditional on agreement of delivery plans with each Freeport. The UK Government will work with the devolved administrations to agree how the ten year window to claim reliefs can be extended to Freeports in Scotland and Wales.

Entrepreneurial Taxes

• The Venture Capital Trust (VCT) sunset clause has been extended beyond 2025 to 2035, continuing the availability of Income Tax relief for investors in qualifying companies and VCTs.

Indirect Taxes

• The zero rate of VAT on the installation of energy saving materials will be extended to include additional goods such as water source heat pumps, as well as extending the relief to works to buildings used for charitable purposes.

• The zero rate on sanitary items will be extended to include reusable period underwear from 1 January 2024.

• Duty rates on all tobacco products will increase by RPI +2%. To reduce the gap with cigarette duty, the rate on hand-rolling tobacco will increase by RPI + 12% this year. These changes will take effect from 6pm on 22 November 2023 and will be included in the Autumn Finance Bill 2023.

• Alcohol Duty rates remain unchanged.

Employment Taxes

National Minimum Wage

• National Minimum Wage rates are to increase with effect from 1 April 2024, including the National Living Wage, which will also extend to those over 21 years old. The revised rates are as follows:

Off-payroll working

• For those workers in the off-payroll working regime (IR35) the government has confirmed that it will legislate to allow HMRC to offset any taxes paid by a worker and their intermediary against any PAYE/NIC liability in cases where an error has been made in applying the rules.

Employment Taxes compliance and data

• There will be tougher consequences for promoters of tax avoidance schemes. These will include a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. HMRC has recently updated their list of such promoters which also include certain “umbrella” companies.
• Three specific new requirements will be implemented via regulations and a further technical consultation as follows:

1. Employers will be required to provide more detailed information on employee hours paid via Real Time Information PAYE reporting.
2. Shareholders in owner-managed businesses will be required to provide the amount of dividend income received from their own companies separately to other dividend income, and the percentage share they hold in their own companies via their self-assessment return.
3. The self-employed will be required to provide information on start and end dates of self-employment via their self-assessment return.

Construction Industry Scheme (CIS)

The following CIS reforms were announced:

• VAT compliance obligations will be added to the Gross Payment Status (GPS) compliance test and the grounds for immediate cancellation of GPS will be expanded.  This means that HMRC can immediately cancel GPS if they have reasonable grounds to suspect that the contractor has fraudulently provided an incorrect return or information on VAT, Income Tax, Corporation Tax or PAYE.
• Regulations will be introduced to remove the majority of payments from landlords to tenants from the scope of the CIS.
• The first review of a gross payment holder’s compliance history will be brought forward from 12 months after application to six, reverting to 12 months thereafter.
• In April 2024, the government will also introduce digital applications for CIS registrations. From this time, telephone applications will no longer be available apart from for those who are digitally exempt, although postal applications will remain available. In due course, and with advance warning to the industry, the government will mandate digital as the only channel of CIS applications.