Introduction
The new ‘Autumn Statement for Growth’ by Jeremy Hunt came out on 22 November 2023 to improve the country’s economic backdrop. The budget highlights 110 business measures to meet the purpose.
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Here is a summary of these.
Table of contents
Personal tax
The Autumn statement highlights changes in income tax, dividends, savings and pensions that you must notice.
Income tax rates
The basic income tax rate remains at 20%, the higher rate at 40%, and the additional tax rate at 45% for 2024-25.
Income tax allowances
Income tax personal allowance and the basic rate limit stay fixed at its current level until April 2028.
The income tax personal allowance rate remains at £12,570, and the basic rate limit is at £37,700. For individuals entitled to a full personal allowance, the point at which they will pay tax at the higher rate will remain fixed at £50,270.
Dividends
According to the government, the tax rate on dividend income from 6 April 2024 will remain as
- 8.75% for dividend ordinary rate
- 33.75% for dividend upper rate
- 39.35% for dividend additional rate
As corporation tax due on overdrawn loan accounts of directors is paid at the dividend upper rate, it will stay fixed at 33.75%.
From 6 April 2024, the government will lower the dividend allowance from £1,000 to £500. As per estimations, this will affect £4.4 million individuals in 2024-25, with the average loss of those affected at around £155.
Individual savings accounts
The government is freezing Individual Savings Accounts (ISA) limits at £20,000, Junior Individual Savings Accounts at £9000, Lifetime Individual Savings Accounts at £4,000 excluding the government bonus, and Child Trust Funds at £9,000 for the tax year 2024-25.
But starting in April 2024, many adjustments will be implemented to permit multiple yearly subscriptions to identical-type ISAs and partial ISA money transfers between providers within the same year.
Pension tax limits
The government has made numerous changes to the tax regimes for pensions for 2023-24, which will remain the same for 2024-25.
- The Annual Allowance (AA) will remain at £60,000
- Individuals having threshold income for a tax year of over £200,000 will have their Annual Allowance for that tax year restricted. The AA will be lowered by £1 against £2 in adjusted income over £260,000 to a minimum Annual Allowance of £10,000
- No Lifetime Allowance (LA) charge
Moreover, as previously announced, the £1,073,100 LA will no longer exist as of 2024-25. All the changes that will be implemented will clarify the lump sum taxation and lump sum death benefits, the applicability of protections, the tax treatment of overseas pensions, transitional arrangements, and reporting obligations.
Employment
This section of the Autumn statement highlights changes to National Insurance Contributions (NICs) and the National Living Wage made by the Chancellor.
Employees and NICs
The cost of NIC is dropping to 10% from 12% for employees on the equivalent annual earnings of between £12,750 and £50,268. This means that a worker on a salary of £50,000 can expect to save over £748 a year. It will come into effect from 6 January 2024.
The self-employed and NICs
From 6 April 2024, Class 2 NICs for self-employed are removed.
- Self-employed individuals who make more than £12,570 in profits will no longer be obliged to pay Class 2 NICs and will still be eligible for contributory benefits like the State Pension.
- Profits between £6,725 and £12,570 will still allow the recipient to obtain a State Pension and other contributory benefits through a National Insurance credit without having to make National Insurance Contributions (NICs)
- Those making profits less than £6,725 and those who choose to pay voluntary Class 2 NICs to receive contributory benefits, including the State Pension, will continue to do the same.
The government will again reform other steps on Class 2 next year.
Additionally, the new regulations state there will be a reduction in the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024.
Extension of NIC relief for hiring veterans
The employer NICs relief program for companies who hire qualified veterans is being extended by the government for an additional year, from April 2024 to April 2025. It means for the first year of a qualifying veteran’s employment in a civilian role, employers will continue to pay no employer NICs up to yearly earnings of £50,270.
National Living Wage and National Minimum Wage
The government has announced higher rates for the NLW (National Living Wage) and National Minimum Wage, which will take effect in April 2024 by fully embracing the Low Pay Commission’s proposals.
Starting in April 2024, individuals aged 21 and 22 will be eligible for the NLW. Beginning on 1 April 2024, it will increase to £11.44; for individuals between 18 and 20, the NLW rate will be £8.60; for 16-17, it will be £6.40; and the apprenticeship rate will be £6.40.
In the first year of apprenticeship, apprentices under 19 and those over 19 are subjected to the apprenticeship rate. The NLW covers people who are older than 21.
Business
Backing British business
The government attempts to boost British business investment by announcing many plans that, if implemented within ten years, can bring in about £20 billion in funding annually from companies. The changes include:
- Full Expensing will be made permanent.
- The elimination of obstacles to vital infrastructure through the restructuring of the UK’s planning system and the acceleration of electricity grid correction times
- A set of pension reform laws that encourage insurers to engage privately in infrastructure by enacting significant Solvency II regulations
- Committing £4.5 billion over 5 years starting in 2025 to vital industrial sectors like automotive, aerospace, life sciences, and clean energy
- New investment zones
- Businesses submitting bids for government contracts above £5 million starting in April 2024 will need to show that they settle their bills in an average of 55 days; this deadline will subsequently tighten to 45 days in April 2025 and ultimately 30 days in subsequent years.
- Changes to research and development
Business Rates
The 75% Retail, Hospitality, and Leisure Relief will be extended for 2024–2025; however, the Small Business Multiplier will be frozen for another year. Following the September CPI (Consumer Price Index), the standard multiplier will be increased. In England, these modifications will become effective on 1 April, 2024.
Freeports and Investment Zones
Under these regimes, firms can take advantage of several benefits, such as higher capital allowances, secondary Class 1 NIC relief for qualifying employers, stamp duty land tax reduction, and allowances for structures and buildings.
The Chancellor has declared that the five-year term for both regimes will now be extended to ten years.
Capital allowances
Under the new Full Expensing rules for companies, most plant and machinery qualifying expenses can be 100% written off as long as they are not second-hand and used. This rule will be applicable for any expenditures made on or after 1 April 2023 and before 1 April 2026. Similar regulations apply to long-term assets and integral features at a 50% rate. Both of these allowances will now be permanent as declared by the government.
The £1 million Annual Investment Allowance is still available, providing a 100% write-off on specific types of machinery and plants.
Research and Development (R&D)
The current SME and Research and Development Expenditure Credit (RDEC) programs will combine with claims for expenses incurred in the accounting period starting on or after 1 April 2024, made under the combined scheme. The rate under this merged scheme will remain fixed at its existing RDEC rate of 20%. Loss-making companies under the combined plan will see a reduction in their notional tax rate from 25% to 19%.
With a few exceptions, R&D claimants can no longer designate a third-party payee for R&D tax credit payments under the new regime, which will take effect in April 2024. Further, beginning 22 November 2023, there will be no more R&D tax credit assignments. This means that, in most cases, R&D tax relief payments will go straight to the company making the R&D claim.
Corporation tax rates
According to official government confirmation, corporate tax rates will not change. This implies that starting in April 2024, the rate for businesses with profits above £250,000 will remain at 25%.
For businesses with profits of £50,000 or less, the 19% small profits rate will apply.
The primary rate of taxation will be gradually increased by a marginal relief for companies (26.5%) with profits between £50,001 and £250,000, resulting in a progressive increase in the effective corporation tax rate.
VAT
The threshold levels for VAT registration and deregistration will remain at £85,000 and £83,000, respectively, for a further two years starting on 1 April 2024.
Additionally, as of 1 January 2024, the government will include reusable period underwear in the present VAT zero rate relief on women’s sanitary products.
Other business measures
A few other business measures have also been announced in the Autumn Statement 2023, including:
- Making cash basis of accounting the default system for self-employed individuals and giving them an option of accruals basis accounting along with certain technical changes to the regime
- Introducing changes to strengthen the Construction Industry Scheme from April 2024
Capital taxes
This part of the Autumn Statement 2023 highlights capital gains and inheritance tax reforms.
Capital gains
According to government declarations, the capital gains tax annual exemption amount will be lowered to £3,000 from its existing amount of £6,000 in April 2024.
Inheritance tax
Until April 2028, the inheritance tax nil-rate bands will remain unchanged at their existing levels. The residential zero rate band will remain at £175,000, the nil-rate band at £325,000, and the residence nil-rate band taper will begin at £2 million until further notice.
Other matters
This is the final section of the Autumn statement, which focuses mainly on state benefits, back to work and Making Tax Digital.
Back to work
The government is launching the “Back to Work Plan,” which calls for spending more than £2.5 billion over the following five years. It will change how people engage with the benefits system and greatly boost the available support. The plan has been designed:
- To support long-term unemployed individuals in finding work
- To ensure individuals with long-term sickness and/or disabilities can better equip and manage their conditions for participating in work if they can do so
The government will invest more than £1.3 billion over the next five years as part of the Back to Work Plan, which aims to address long-term unemployment by creating an extensive system that encourages and enables jobless Universal Credit claimants to find jobs.
These policies that aim to expand Additional Jobcentre Support and reinforce Restart are an extension of the previously proposed reforms.
The government also focuses on strengthening the Universal Credit sanctions regime to enact the government’s expectations that individuals who can work must engage with the available support or risk losing their benefits.
No claimant should, therefore, be eligible for full benefits at the claimant review stage, which occurs after 18 months of unemployment, if they haven’t made every effort to comply with Jobcentre support.
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State benefits
The government is raising working age benefits by 6.7% starting in April 2024 to keep up with inflation. The triple lock and the basic State Pension, the new State Pension and the Pension Credit standard minimum guarantee will be increased by 8.5%.
Making Tax Digital
After reviewing the effects of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses, the government has released its findings.
These include a decision to keep the current MTD threshold at £30,000 and to make design modifications to streamline and enhance the system.
These modifications will go into effect in April 2026. The administration will also ensure taxpayers enrolling in MTD starting on 6 April 2024 are liable to the revised fine schedule for late tax payment and return filing.