The Autumn Statement delivered on November 22 2023 by the Chancellor of the Exchequer outlined several significant tax matters that will shape the fiscal landscape for the coming year. This article aims to outline the key tax-related announcements made during the statement, providing an overview of the government's tax policies and their potential impact on businesses and individuals.
Business tax
To encourage business growth and investment, the government announced some measures as follows:
- Capital allowances: Permanent expensing – Full expensing will be made permanent, so that investments made by companies in qualifying plants and machinery, after April 1 2026, will continue to qualify for a 100% first-year allowance for main rate assets, and a 50% first-rate allowance for special rate (including long-life) assets. Cars, assets for leasing, and second-hand assets will be excluded from these 100% and 50% first-rate allowances.
- Real estate investment trusts (“REITS”) - Further to the publication of draft legislation on July 18 2023, the government will make amendments to the rules for REITs to enhance the competitiveness of the regime. Changes will variously take effect from Royal Assent of the Autumn Finance Bill 2023, apply to accounting periods ending on or after April 1 2023, or are deemed to have always had effect.
- Merger of research and development (“R&D”) tax reliefs - The existing research and development expenditure (“RDEC”) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after April 1 2024 to be claimed in the merged scheme. Merging schemes is a significant tax simplification, including 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%.
- R&D tax reliefs: additional tax-relief for R&D intensive loss-making SMEs - The intensity threshold in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%, bringing approximately 5,000 more R&D intensive SMEs into scope of the relief. The government will also introduce a one-year grace period so that companies that dip under the 30% qualifying R&D expenditure threshold will continue to receive relief for one year. Businesses will be able to claim for expenditure incurred from April 1 2023 once the Autumn Finance Bill 2023 has received Royal Assent, with the reduction in intensity threshold and grace period coming into effect for accounting periods beginning on or after April 1 2024.
- R&D tax reliefs: removing nominations and voiding assignments - From April 1 2024, R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions. In addition, no new assignments of R&D tax credits will be possible from November 22 2023. This means that in most circumstances payments of R&D tax reliefs will be paid directly to the company that claims for the R&D, ensuring they have full oversight of the claim, and receive payment more quickly.
Income tax
The Chancellor confirmed that there would be no changes to the basic, higher, or additional rates of income tax for the upcoming tax year, however confirmed the following to provide stability and certainty for taxpayers, ensuring no unexpected burdens on personal finances:
- National insurance contributions (“NIC”) - From January 6 2024, the main rate of Class 1 Primary NIC will fall from 12% to 10%, increasing post-tax earnings for employees by up to £754 per annum pro rata. For the self-employed and LLP partners, the main rate of Class 4 NIC will be reduced from 9% to 8% from 6 April 2024. In addition, the requirement to pay Class 2 NIC for the self-employed will cease from April 6 2024.
- Self-Assessment regime changes - The threshold at which an individual must file a Self-Assessment tax return has recently increased to only cover those whose income exceeds £150,000. The threshold will be abolished altogether from April 6 2024, removing the requirement for up to 338,000 taxpayers to submit a tax return. The obligation to submit a return will remain for individuals who have other tax liabilities, for example on investment income or capital gains.
- Pensions - The government restated its intention to abolish the Pension Lifetime Allowance from April 6 2024, however, it should be noted that Labour has stated its intention to reinstate it. Care should be taken in terms of pension planning for the time being.
Conclusion
The Autumn Statement 2023 addressed several important tax matters, aiming to provide stability, support economic growth, and address emerging challenges. It is essential for taxpayers to stay informed about these changes and seek professional advice to ensure compliance and enhance their financial strategies.
