On 22 November 2023, the UK Chancellor Jeremy Hunt delivered his Autumn Statement, commonly known as the UK budget, which focusses on building a stronger and more resilient economy.
According to the Chancellor, the UK government’s plan is to unlock growth and productivity through boosting business investment, getting more people into work, and cutting tax for workers. Below we set out some of the key takeaways from the budget announcement.
There has been no further change to the rates of corporation tax.
Annual investment allowances
The annual investment allowance was previously confirmed at a permanent rate of £1m from April 2023.
‘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.
The government will introduce a business rates support package worth £4.3 billion over the next five years to support small businesses. The small business rates (SBR) relief 75% discount will be extended for a year (2024-25) for the retail, hospitality, and leisure sector. In addition, the SBR multiplier will also be frozen for a year.
Research and development (R&D)
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, being heralded as a significant tax simplification, bringing an aligned set of qualifying rules and a more visible above the line credit. The notional tax rate applied to loss-makers in the merged scheme will be lowered from 25% as per the current RDEC scheme, to 19%.
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 that dip under the 30% qualifying R&D expenditure threshold will continue to receive relief for one year.
The Investment Zones programme and freeport tax reliefs will be extended from five years to ten years, and a new £150 million Investment Opportunity Fund will support Investment Zones and Freeports to secure specific business investment opportunities.
Three advanced manufacturing Investment Zones will be established in Greater Manchester, East Midlands, and West Midlands.
Income tax rates and thresholds
There have been no changes to income tax thresholds or rates.
For employees: Class 1 contributions for employees will be reduced from 12% to 10% from 6 January 2024.
For self-employed: The rate of Class 4 NICs, paid by self-employed individuals on all earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8% from April 2024. In addition, the weekly Class 2 NICs – the flat rate compulsory charge which is currently £3.45 paid by self-employed people earning more than £12,570 – will be abolished from April 2024.
The national insurance thresholds for all classes were previously announced to be frozen until April 2028 at the current levels – for detailed tax rates and thresholds up to 2022/23 download the ACCA Spring Budget Tax Rates and Tables guide.
Reform on self-assessment
The government will no longer require individuals with income taxed only through PAYE to file a self-assessment return from 2024-25. The government used to require those earning more than £100,000 to file for self-assessment, even if they had no additional income outside employment. The threshold was raised to £150,000 in April and has now been abolished entirely from 2024-25.
Income tax cash basis
Following a consultation at the Spring Budget 2023, the government is expanding and simplifying the income tax cash basis for the self-employed and partnerships. These changes will take effect from 6 April 2024, for 2024-25 and will be included in the Autumn Finance Bill 2023.
National Minimum Wage
From 1 April 2024, the National Minimum Wage is increased to £11.44 an hour, for those aged 21 and over, with rates for those aged 20 and under also increased.
Pensioners will get a significant uplift to their state pension for a second consecutive year, getting an extra £900 a year from April 2024. The state pension will increase by 8.5%.
The lifetime pension allowance charge was removed from April 2023 and the allowance is abolished entirely from April 2024.There has been no changes to pension allowance increased which took effect from April 2023.
Geographical scope of agricultural property relief and woodlands relief from inheritance tax
As previously announced in the Spring Budget, the government introduced legislation in the draft Finance Bill 2023-24 to restrict the scope of agricultural property relief and woodlands relief to property in the UK.
Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.
Capital gains tax: reduced annual exemption
As previously announced, the annual exemption amount for capital gains tax for individuals reduced from £12,300 to £6,000 from April 2023. This will reduce further down to £3,000 from April 2024.
This Autumn Statement brought in some ‘winners’ and some ‘losers’. We have summarised the likely winners and losers from the autumn statement.
For taxpayers, the national insurance falling from 12% to 10% will save them up to £754 a year. The self-employed will also have their national insurance contributions cut by 1% from 9% to 8% from April next year, and Class 2 NI will be abolished. For example, an average self-employed person earning £25,000 will save about £300 in tax a year.
The National Living Wage will increase by more than £1 an hour to £11.44 an hour from April for workers over 23. This is about a 9.8 % increase – welcoming news for low-income workers.
The pensioners and benefit claimants saw their income increase by 8.5% and 6.7% respectively. Also, Individuals Saving Account (ISA) savers can now open more than one ISA of the same type each year.
Businesses can now get more tax breaks when they invest in qualifying assets, such as plants and machinery. This is because the government has made “full expensing deduction” permanent and the £1m Annual Investment Allowance previously confirmed permanent.
Research and development scheme will also be simplified from 1 April 2024, making merging RDEC and SME schemes claimed easier.
The main losers are the workers who have been dragged into the higher tax bands due to the freezing of the income tax thresholds and wage increases. Also, significant reforms to benefits will force more benefits claimants to look for jobs.
Finally, bereaved families have no benefits as inheritance tax allowances remain frozen.
If you have any questions about the government’s Autumn Statement and how it may impact you or your business, our team of experts at Hawksford are happy to help you navigate and make most of the opportunities presented by this Budget.