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Autumn Statement 2023

Overview

On 22 November 2023, the Chancellor delivered his Autumn Statement. Mainly, this outlined changes from the start of the next tax year and there are some important points for accountants. However, there is one change happening mid-way through the 2023/24 tax year.

We will keep you updated with the following announcements for the future:

• Legislation so individuals who only have PAYE income do not have to complete a tax return
• Reforms of the CIS scheme regarding the Gross Payment Status (GPS) compliance test
• The ‘pot for life’ or portable pension pot which will be subject to another consultation
• HMRC’s requirement for more information on tax returns and RTI submissions

HMRC released a full schedule of tax rates and allowances, as is usual. This doesn’t mean future changes won’t be made at the UK Budget which is expected in March 2024.

Expanding Cash Accounting

Following a consultation after the Spring Budget, the UK Government said it will extend the cash basis of accounting (or cash accounting). In the first instance there will be improved cash basis guidance from HMRC. Further:

• The turnover threshold will be removed completely
• The cash basis will be set as the default method for calculating trading income (though businesses can elect to use the accruals basis)
• Cash basis interest deductions will be aligned with the rules that apply to the accruals basis and, similarly
• The restrictions on loss relief for losses generated in the cash basis will be aligning with the rules for losses under the accruals basis

The changes will apply from tax year 2024/25.

Income Tax

There is no change to the main rates of Income Tax (20%, 40% and 45%) or the thresholds which have been frozen until 2028. This still means the threshold at which 45% tax is paid remains at £125,140, yet taxpayers have their personal allowance tapered away by HMRC at £1 for every £2 above £100,000. This means their personal allowance completely disappears at £125,140.

This must be considered with the fact that powers are shared with Wales and Scotland so we must wait until their Budgets on 19 December 2023 to get the complete UK picture.

Still applicable is the High Income Child Benefit Charge (HICBC) and HMRC start to reduce the child benefit received by the family where the highest earner has total relevant income over £50,000. This reduction is achieved by increasing the Income Tax payable and means some Basic Rate (20%) taxpayers will be subject to the HICBC and will need to submit a tax return.

The personal allowance (and Marriage Allowance) has also been frozen until 2028. Together with the freeze to thresholds, this has brought people into the tax system for the first time. The Autumn Statement did confirm the Blind Person’s Allowance (BPA) and the Married Couple’s Allowance (MCA) will be uprated for 2024/25:

Tax Allowance	2023/24	2024/25	Change
	£	£	£
Personal Allowance	12,570	12,570	0
Marriage Allowance	1,260	1,260	0
The Married Couple’s Allowance*
Maximum	10,375	11,080	+ 705
Minimum	4,010	4,280	+ 270
Income Limit	34,600	37,000	+ 2,400
Blind Person’s Allowance	2,870	3,070	+ 200

* Note that the Married Couple’s Allowance is an age-related allowance which has a different income limit compared to the UK-wide Personal Allowance. The age-related allowance is reduced by £1 for every £2 of income over £37,000.

Dividend Tax

We already know the Dividend Allowance will be cut to £500 from 06 April 2024 (from £1,000). This was announced in 2022.

Once the Dividend Allowance has been used, dividends above are taxed depending on the taxpayer’s Income Tax band. These are also unchanged for 2024/25 as follows:

Tax band	2023/24	2024/25	Change
	%	%	%
Basic rate	8.75	8.75	0
Higher rate	33.75	33.75	0
Additional rate	39.35	39.35	0

Company Cars (Appropriate Percentages)

Where a company car is provided and available for private use, the benefit depends on the appropriate percentages relevant to the CO2 emissions. In 2022, legislation set these up until 2028 and there is no increase between tax years 2023/24 and 2024/25. From 2025/26, all percentages will increase by 1 percentage point, but no car will have a taxable benefit of more than 37%.

Where the company car is fuelled by diesel, the appropriate percentages are increased by 4% known as the diesel supplement but the taxable benefit is still capped at 37%. This supplement does not apply to cars that meet the Real Driving Emissions Step 2 (RDE2) standard.

Company Vans (Scale Charge)

Where a company van is provided and available for private use, this is frozen at 2023/24 level for tax year 2024/25 (£3,960).

Company Car and Van Charges(Fuel)

For P11Ds, where a Van Benefit Charge or a Car & Van Fuel Benefit Charge arises (because a vehicle is provided as a benefit by the employer), the rates are frozen for 2024/25 at the current tax year levels:

• Car fuel - £27,800
• Van fuel - £757

National Insurance

Perhaps the biggest announcements were regarding National Insurance applicable to employees.

Class 1

From 06 January 2024, the main rate of Class 1 Primary (employee) National Insurance Contributions will reduce from 12% to 10%. This is within the current tax year 2023/24. The following are impacted:

• Employees on NI category letters A, F, H, M and V

• Employees earning between the Primary Threshold and the Upper Earnings Limit

For payments made on and after 06 January 2024, National Insurance for employees will be calculated as follows:

Band	Standard	Pensioners	Reduced	Deferred
Table Letters	A / F / H / M and V	C / S	B / I	J / L and Z
Earnings up to LEL	NIL	NIL	NIL	NIL
Earnings between LEL and PT	0%	NIL	0%	0%
Earnings between PT and UEL	10%	NIL	5.85%	2%
Earnings above UEL	2%	NIL	2%	2%

There is no reduction in the main percentage that applies to employers.

For directors that are on an annual pay earnings period regardless of how often they are paid, there is a ‘blended’ National Insurance rate of 11.5% for 2023/24. This represents 9 tax months at 12% and 3 tax months at 10%.

You are strongly advised to contact your software provider who will have to make this change in software for payments made on and after 06 January 2024.

All earnings bands are frozen at 2023/24 tax year levels for 2024/25.

Class 2

This is the National Insurance that is paid at a weekly flat rate (currently £3.45 per week) by the self-employed with profits above £12,570. From tax year 2024/25, this is being abolished. Class 2 is significant for eligibility to contributory benefits, including the State Pension so the following will apply:

• Where profits are above £12,570, no Class 2 is payable but access to benefits and State Pension will remain
• Where profits are between £6,725 and £12,570, no Class 2 is payable but access to benefits and State Pension will continue through a National Insurance credit
• Where profits are below £6,725, access to benefits, including the State Pension, can continue by paying voluntary Class 2 National Insurance

The weekly rate has been frozen at £3.45 for 2024/25 rather than increasing by any inflationary measure.

Class 3

This has been frozen in 2024/25 at its 2023/24 level (£17.45 per week).

Class 4

This is the other National Insurance payable by the self-employed where there is a profit (between the LPL (Lower Profits Limit £12,570) and UPL (Upper Profits Limit(£50,270). The rate between these thresholds is 9% in 2023/24 and it will reduce to 8% in 2024/25.

The Contribution rates can be expressed as follows:

Annual Profits band	2023/24	2024/25
	%	%
Below Lower Profits Limit (LPL)	0	0
LPL to UPL	9	8
Above UPL	2	2

 

National Minimum Wage

On 21 November 2023, the UK Government accepted the recommendations of the Low Pay Commission. The headline announcement is that the (higher) National Living Wage will be paid to those over 21 rather than 23 now.

The following rates will apply from April 2024:

Rate	From April 2023	From April 2024
	£	£
Adults (23+) aka the National Living Wage	10.42	N/A
Adults (21+) aka the National Living Wage	N/A	11.44
Adult (21 – 22)	10.18	Abolished
Youth Development (18 – 20)	7.49	8.60
Under 18 (above compulsory school leaving age)	5.28	6.40
Apprentice	5.28	6.40

So, not only do employers have to pay the increased rates, any payroll software that has ‘prompts’ to pay at the higher rate when the worker turns 23 will have to change.

Capital Gains Tax

The Autumn Statement didn’t mention Capital Gains Tax; however, we know the annual exemption (allowance) will be cut in half to £3,000 on 06 April 2024, with the exemption for trusts set at half that level: £1500.

All rates that applied in 2023/24 will apply in 2024/25

Main rates for individuals other than gains on residential property (not eligible for Private Residence Relief) and carried interest:

	%	%
Income Tax basic rate payer	10	10
Income Tax higher rate payer	20	20

Rates for individuals (for gains on residential property not eligible for Private Residence Relief, and carried interest):

	%	%
Income Tax basic rate payer	18	18
Income Tax higher rate payer	28	28

Main rate for trustees and personal representatives other than gains on residential property (not eligible for Private Residence Relief) and carried interest:

	%	%
All taxpayers	20	20

Corporation Tax

Capital Allowances

A Corporation Tax 100% First Year Allowance was introduced in the Spring Budget for the period 01 April 2023 to 31 March 2026. Known as ‘full expensing’, this replaced the 130% super-deduction which ended on 31 March 2023. In addition, a 50% first-year allowance was introduced for ‘Special Rate’ expenditure. So, there is:

• Full expensing at the main rate of 100% for any expenditure that is not ‘special’
• A 50% allowance is available for expenditure that is special (e.g. expenditure on thermal insulation, integral features and long-life assets)

The Autumn Statement confirmed that both the 100% and 50% would be made permanent with no end date. The fact they have been made permanent does reduce the impact of the earlier rises to Corporation Tax rates and is good for business and gives certainty to accountants.

There will also be a consultation on extending full expensing to include assets for leasing.

Research and Development Tax Reliefs

In 2023/24, there are two schemes that can be used to get a Corporation Tax credit against qualifying Research & Development (R&D):

1. The Research and Development Expenditure Credit (RDEC) and 

1. The small or medium enterprise (SME) R&D relief

These will be merged and for accounting periods beginning on or after 01 April 2024, R&D credit must be claimed in the merged scheme. Further, the ‘intensity threshold’ in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%.

Further details of this merged scheme will be provided(i.e. they are not available now!).

Also, in line with other similar changes for other taxes, R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, e.g. to a repayment agent. From 22 November 2023, credit payments can no longer be assigned (to the repayment agent) and will be repaid directly to the company making the claims.

Inheritance Tax

The rates, exemptions and thresholds for Inheritance Tax have been frozen since 2020/21 (and the nil rate band has been frozen at £325,000 since 2009). It was widely expected there would be mention of changes to Inheritance Tax but nothing was mentioned.

However, we do know that land situated outside of the UK will no longer qualify for agricultural property relief and woodlands relief from 06 April 2024.

Landfill Tax

This applies in England and Wales only and is a tax designed to encourage waste producers and the waste management industry to switch to more sustainable alternatives for disposing of material. The lower the tonnage of waste sent to landfill, the lower the tax. As announced already at the Spring Budget, the rates are as follows:

Material sent to landfill	Rates from 1 April 2023	Rates from 1 April 2024
	£ per tonne	£ per tonne
Standard rate	102.10	103.70
Lower rated	3.25	3.30

Vehicle Excise Duty (VED)

The Autumn Statement uprated the VED rates for cars, vans and motorcycles in line with RPI (inflation) from 01 April 2024. However, lower emitting vehicles have not changed and this can be expressed as follows where the car or van was first registered on or after 01 March 2001:

Cars

Vehicle Excise Duty band	CO2 emissions (g/km)	2023/24	2024/25
		£	£
A	Up to 100	0	0
B	101 to 110	20	20
C	111 to 120	35	35
D	121 to 130	150	160
E	131 to 140	180	190
F	141 to 150	200	210
G	151 to 165	240	255
H	166 to 175	290	305
I	176 to 185	320	335
J	186 to 200	365	385
K (includes cars emitting over 225g/km registered before 23 March 2006)	201 to 225	395	415
L	226 to 255	675	710
M	Over 255	695	735

Vans

Vehicle ‘type’	2023/24	2024/25
	£	£
Early Euro 4 and Euro 5 compliant vans	140	140
All other vans	320	335

HMRC’s ‘rates and allowances’ document details the other Vehicle Excise Duty bands and rates that may apply (for example cars and vans registered before 01 March 2001 and for motorcycles).

To support the haulage sector, VED for HGVs and the HGV levy will both remain at 2023/24 rates for 2024/25.

Value Added Tax

From 01 January 2024, the government will extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear.

Annual Tax on Enveloped Dwellings (ATED)

This annual tax is payable by companies or other non-natural person (e.g. a trust), is not commercially let out or used for some other qualifying purpose and is valued at more than £500,000. Where there is a liability to ATED, an annual return must be submitted for the chargeable period.

Autumn Statement 2023 announced that the chargeable amounts for ATED will be uprated by the September CPI figure of 6.7% for the 2024/25 ATED charging period, which leads to the following values:

Property value	2023/24	2024/25
£500,001 to £1 million	£4,150	£4,400
£1,000,001 to £2 million	£8,450	£9,000
£2,000,001 to £5 million	£28,650	£30,550
£5,000,001 to £10 million	£67,050	£71,500
£10,000,001 to £20 million	£134,550	£143,550
£20,000,001 and over	£269,450	£287,500

Stamp Duty and Stamp Duty Reserve Tax

The Autumn Statement announced from 01 January 2024 it is extending the Growth Market Exemption (a relief from Stamp Duty and Stamp Duty Reserve Tax). The Exemption will include smaller, innovative growth markets. 

The threshold for the market capitalisation condition used within the exemption is increased from £170 million to £450 million. This widens the access to the Exemption.

Stamp Duty only applies to property purchases in England and Northern Ireland. It will be up Scotland and Wales to decide whether to widen their own devolved tax regimes (Land and Buildings Tax in Scotland and Land Transaction Tax in Wales).