Autumn Statement 2023: the key announcements

A full round-up from Carpenter Box.

The Chancellor Jeremy Hunt started his speech by claiming he was bringing forward 110 growth measures to back British business. He did not list them all in the speech, but there is no doubt that the documents released online when he sat down contained a mass of detail – some specific rule changes coming in on particular dates, and some plans that are being considered for later.

In this article we summarise the main tax changes that were announced by Mr Hunt, with an explanation of what they are likely to mean for your business and personal finances.

Business tax

Cash basis

The Autumn Statement announced that the turnover limits will be removed for 2024/25: unincorporated businesses of any size will use the cash basis as the default method of computing their profits. Interest of any amount will be eligible for deduction, as long as it is wholly and exclusively incurred for the purposes of the business. It will still be possible for a business to opt to use traditional accruals accounting rather than the cash basis, as is the case at present for rental income.

Capital allowances on plant and machinery

The Spring Budget included the introduction of ‘full expensing’ of capital expenditure by companies on new plant and machinery (P&M) for a three-year period from 1 April 2023 to 31 March 2026. The Chancellor has now made this ‘permanent’, which makes little difference to government revenue in the short term but is shown as a £7.5 billion reduction in 2026/27.

Research and development (R&D)

The government has confirmed its intention to merge the two schemes for SMEs and large companies for accounting periods beginning on or after 1 April 2024. It was previously announced that the changes would apply for expenditure incurred from 1 April 2024; the revised implementation date will avoid the issue of having to make claims under two different regimes for expenditure in the same accounting period. The rate of credit under the merged scheme will be the current RDEC rate of 20%. The notional tax rate applied to loss-making companies will be the small profit rate of 19%, rather than the 25% main rate currently used in the RDEC.

Construction Industry Scheme

From 6 April 2024, VAT obligations are added to the statutory compliance test for being granted (and for keeping) gross payment status (GPS). The measure also extends one of the grounds for immediate cancellation of GPS. HMRC can withdraw GPS if they have reasonable grounds to suspect that the GPS holder has fraudulently provided an incorrect return or incorrect information in relation to a list of taxes which will be extended to include VAT, Corporation Tax Self-Assessment (CTSA), Income Tax Self- Assessment (ITSA) and PAYE.

Business rates

The small business multiplier will be frozen in 2024/25 for a fourth consecutive year at 49.9p, while the standard multiplier will be uprated by inflation to 54.6p. In addition, eligible retail, hospitality, and leisure businesses qualify for 75% business rates relief, capped at £110,000 per business and extended for a year from 2023/24 to 2024/25.

Energy saving materials

The installation of energy saving materials currently qualifies for zero-rating for VAT. This relief is to be extended with effect from February 2024 to new technologies, such as water-source heat pumps, and also to installations in buildings used solely for a relevant charitable purpose.

Personal tax

Dividend income

The dividend allowance, below which no tax is paid on dividends, will fall from £1,000 in 2023/24 to £500 in 2024/25. The reduction in this allowance (which was £2,000 for several years up to 2022/23) will require many more people to file self-assessment tax returns to settle what will often be a relatively small tax liability.

National Living Wage (NLW)

From 1 April 2024, NLW will apply to those aged 21 or over (currently 23), and will rise from £10.42 per hour to £11.44, with comparable increases to the other rates that apply to younger workers and apprentices.

National Insurance Contributions (NIC)

The largest tax cut announced in the Autumn Statement, amounting to £8.7 billion in 2023/24, is a cut in the rate of employee NICs on earnings between the lower and upper earnings limits from 12% to 10%. This will take effect on 6 January 2024 and will save up to £754 in a full tax year (for an employee earning £50,270 or above).

Self-employed people have for many years had to pay flat rate Class 2 NICs, which have conferred entitlement to State pension, and profit-related Class 4 NICs. These are both cut with effect from 6 April 2024:

• Class 2 NICs will not be required to secure benefits for anyone earning above £6,725, saving £179.40 a year – they can still be paid voluntarily for anyone earning less than that to maintain a full contribution record;

• The rate of Class 4 NICs on profits between £12,570 and £50,270 will be reduced from 9% to 8%, saving up to £377.

The combined saving is up to a maximum of £556.

State pension

The State pension will continue to be uprated in line with the ‘triple lock’ commitment. This means that the rate will increase by 8.5% in April 2024 based on the increase in average earnings, rather than the lower figure for price inflation. At the new weekly amount of £221, pensioners will receive nearly £900 a year more than in 2022/23.

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to residential property worth above £500,000 that is owned through companies and other corporate structures, unless the situation qualifies for a relief. The rates automatically increase each year with inflation and will rise by 6.7% from 1 April 2024, in line with the September 2023 Consumer Prices Index.

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

A number of points have been confirmed regarding MTD ITSA in the accompanying documentation. Firstly, those with gross income (self-employed and property income) under £30,000 will not be brought into MTD ITSA, although this will be kept ‘under review’. The requirement for taxpayers to file an End of Period Statement (EOPS) has been removed; instead, the EOPS will be merged into the ‘Final Declaration’ process. The reporting of quarterly information will become cumulative, rather than just reporting that quarter’s figures. This change should make amendments easier to deal with, as taxpayers will be able to correct any errors in their next quarterly update, rather than resubmitting past quarters.

Get in touch

We will be happy to help you adapt and reassess your plans in light of any upcoming changes. Please get in touch with us via email at info@carpenterbox.com or visit www.carpenterbox.com for more information.

*Information correct as of 22 November 2023.