The headline message from the Chancellor
The Chancellor delivered his Autumn Statement for Growth aimed at building a stronger and more resilient economy. He highlighted that the plan is to “unlock growth and productivity by boosting business investment by £20 billion a year, getting more people into work, and cutting tax for 29 million workers.
Key measures announced by the Chancellor in the Autumn Statement are summarised within this Guide. It also includes a reminder of some previous announcements that will be taking effect from next April or later.
Extension of Full Expensing Deduction
The “Full Expensing” deduction, initially introduced on April 1, 2023, and scheduled to end on March 31, 2026, will be permanently extended through the Autumn Finance Bill. This means businesses can continue to claim a 100% first-year deduction from profits before tax (50% for special pool rate) on qualifying new main-rate plant and machinery investments.
Annual Investment Allowance
The Annual Investment Allowance (AIA) has been permanently set at £1 million per year from April 2023 onwards. This allows businesses to deduct the full cost of qualifying plant and machinery investments from their taxable profits in the year they are made.
Research and Development
The Autumn Statement has brought about significant changes to research and development (R&D) tax reliefs for expenditure incurred on or after April 1, 2023:
- SME Additional Deduction: Reduced from 130% to 86%
- SME Credit Rate: Decreased from 14.5% to 10%
- R&D Expenditure Credit: Increased from 13% to 20%
- R&D Intensive SME Payable Credit: Introduced at a rate of 14.5%
A company is considered R&D intensive if its qualifying R&D expenditure amounts to 40% or more of its total expenditure. These eligible loss-making companies can now claim £27 from HMRC for every £100 of R&D investment, compared to £18.60 for non-R&D intensive loss makers. This represents a significant boost for R&D-intensive SMEs.
Key Updates to Research and Development Tax Reliefs
Reduced Intensity Threshold for R&D Intensive SMEs
The government has announced that the intensity threshold for claiming enhanced support for R&D-intensive loss-making SMEs will be reduced from 40% to 30%, effective for accounting periods beginning on or after April 1, 2024. To ensure a smooth transition, a one-year grace period will be implemented, allowing companies that fall below the new 30% threshold to continue receiving relief for one year.
Merged Research and Development Expenditure (RDEC) and SME Schemes
In a significant tax simplification move, the existing RDEC and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after April 1, 2024, to be claimed under the new merged scheme. This streamlined approach will introduce a unified set of qualifying rules and a more transparent above-the-line credit. Additionally, the notional tax rate applied to loss-makers under the merged scheme will be reduced from 25% (current RDEC scheme) to 19%.
Businesses will be able to claim R&D tax relief for expenditure incurred from April 1, 2023, once the Autumn Finance Bill 2023 receives Royal Assent. The reduction in the intensity threshold and the introduction of the grace period for R&D-intensive SMEs will take effect for accounting periods beginning on or after April 1, 2024.
These changes aim to provide greater clarity and support for businesses engaged in R&D activities, fostering innovation and economic growth.
Enhanced Cash Basis for Self-Employed and Partnerships
Expanding on the consultation held at Spring Budget 2023, the government is implementing a broader and more streamlined cash basis for income tax purposes, applicable to self-employed individuals and partnerships. These changes will take effect from April 6, 2024, for the 2024-2025 tax year and will be detailed in the Autumn Finance Bill 2023.
Extended and Frozen Small Business Rates Relief
In a move to support the retail, hospitality, and leisure sectors, the government has extended the 75% discount for small business rates (SBR) relief for one year, covering the 2024-2025 tax year. Additionally, the SBR multiplier will be frozen for the same period, providing further relief to eligible businesses.
Government grants to install electric vehicle charge points
Businesses can now claim 100% of the costs of installing an electric vehicle charging point as a capital allowance. This means that businesses can deduct the full cost of the installation from their taxable profits in the year they make it. The government has also extended the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes. This means that businesses have more time to take advantage of this generous tax relief.
Theatre Tax Relief
The Theatre Tax Relief, which was due to taper to 30% (for non-touring productions) and 35% (for touring productions) on 1 April 2023, was set to remain at 45% and 50% respectively until 31 March 2025. From 1 April 2025, the rates will be 30% and 35%, and rates will return to 20% and 25% on 1 April 2026.
Stricter Penalties for Tax Avoidance Promoters
The Autumn Finance Bill 2023 introduces harsher consequences for individuals and entities promoting tax avoidance schemes. These measures include:
- New Criminal Offense: Individuals who continue to promote tax avoidance schemes after receiving a warning to cease will face criminal prosecution.
- Director Disqualification Powers: HMRC gains the authority to seek disqualification of directors from companies involved in promoting tax avoidance. This includes individuals who control or influence such companies.
These changes take effect upon Royal Assent of the Autumn Finance Bill 2023.
Extension of Recovery Loan Scheme
The Recovery Loan Scheme, initially designed to end in June 2022, has been extended until June 2024 to support businesses recovering from the pandemic. Visit the British Business Bank website FAQs for scheme details and eligibility criteria.
Clarification on Tax Relief for Self-Employed Training Costs
HMRC will issue clearer guidance on tax-deductible training costs for self-employed individuals. This ensures businesses can confidently claim expenses for updating skills, keeping pace with technological advancements, or adapting to industry practice changes.
Benefits of Simplified Tax Systems
Simplified tax systems offer several advantages:
- Enhanced Understandability: Easier comprehension of tax regulations for individuals and businesses.
- Reduced Errors: Lower likelihood of errors due to simplified processes.
- Reduced Compliance Burden: Lessened administrative burden associated with tax compliance.
- Promoted Equity: Ensures taxpayers understand their tax calculations and payment obligations.
- Enhanced Transparency: Promotes transparency in the tax process.
As previously announced, the personal tax thresholds for 2023-2028 have been frozen at the current levels:
- Personal allowance: £12,570
- Basic rate threshold: £50,270
- Higher rate threshold: £125,140 (reduced from £150,000 on April 6, 2023)
For individuals with annual income exceeding £100,000, the personal allowance is gradually withdrawn at a rate of £1 for every £2 of income above £100,000. This means the entire personal allowance is lost at £125,140 (£100,000 + (£12,570 x 2)).
The national insurance thresholds for all classes have been frozen at the current levels until April 2028.
The employment allowance remains at £5,000.
National Insurance Contributions (NICs)
- Extension of NICs Relief for Employers of Eligible Veterans: The government is extending the NICs relief for employers of eligible veterans for one year. This means businesses will continue to pay no employer NICs on annual earnings up to £50,270 for the first year of a qualifying veteran’s employment in a civilian role.
- Abolition of Weekly Class 2 NICs: The weekly Class 2 NICs, a flat-rate compulsory charge currently paid by self-employed people earning more than £12,570, will be abolished from April 2024. Access to contributory benefits will be maintained, and those currently paying voluntarily will still be able to do so at the same rate.
- Reduction in Class 4 NICs Rate: The rate of Class 4 NICs on all earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8%, from April 2024.
- Reduction in Class 1 Contributions for Employees: Class 1 contributions for employees will be reduced from 12% to 10% from 6 January 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.
National Minimum Wage
- Increase in 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.
- Significant State Pension Uplift: 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%.
- Increase in Full New State Pension: This means the full new state pension will increase from £203.85 per week to £221.20, or £11,502.40 per year.
- Increase in Full Basic State Pension: The full basic state pension will rise from £156.20 per week to £169.50 per week – equating to a total of £8,814 per year.
These changes aim to provide individuals with financial support and flexibility, particularly in the current economic climate.
- Lifetime Pension Allowance Abolition: As previously announced, the lifetime pension allowance charge was eliminated in April 2023, and the allowance itself will be abolished entirely in April 2024.
- Increased Pension Annual Allowance: The pension annual allowance has been increased from £40,000 to £60,000, effective April 2023.
- Increased Money Purchase Annual Allowance: The money purchase annual allowance has been raised from £4,000 to £10,000, applicable to individuals who have already begun drawing a pension.
- Addressing “Small Pot” Pensions: The government is addressing the long-standing issue of “small pot” pensions by launching a call for evidence on a lifetime provider model. This model would allow individuals to have contributions paid into their existing pension scheme when they change employment, providing greater control over their retirement savings. While beneficial for individuals, this may pose administrative challenges for small businesses.
EIS and VCT Extension
The government will extend the existing sunset clauses for the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) from April 6, 2025, to April 6, 2035.
Inheritance Tax Relief on Agricultural Property and Woodlands
As previously announced in the Spring Budget, the government has introduced legislation to restrict the scope of agricultural property relief and woodlands relief to property located within the UK. This means that property located in the European Economic Area (EEA), the Channel Islands, and the Isle of Man will be treated similarly to other property situated outside the UK. These changes will take effect from April 6, 2024.
Enhanced Childcare Support
The government has announced a phased expansion of childcare support to provide 30 hours of free childcare per week for children aged nine months and above. This phased rollout will ensure the availability of childcare places across the country.
- April 2024: Working parents of two-year-olds will be eligible for 15 hours of free childcare per week.
- September 2024: The 15 hours of free childcare will be extended to working parents of children aged nine months and above.
- September 2025: Working parents of children aged nine months and above will receive 30 hours of free childcare per week, continuing until their child starts school.
Similar to the existing childcare offer, these hours can be utilized over 38 weeks of the year (during school term time) or up to 52 weeks if fewer hours are used per week.
Simplifying Making Tax Digital (MTD)
The Chancellor has outlined changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). These changes include:
- Maintaining the current MTD threshold at £30,000
- Implementing design modifications to enhance system simplicity and usability
These changes will take effect from April 2026. Additionally, the government is ensuring that taxpayers joining MTD from April 6, 2024, will be subject to the government’s new, fairer penalty system for late filing of tax returns and late payment of tax.
Streamlined Self-Assessment Tax Returns
Starting in 2024-2025, individuals with income solely taxed through PAYE will no longer be required to file a Self-Assessment tax return.
These measures aim to provide greater support for parents and simplify tax compliance for individuals.
Credits: ACCA UK’s Technical Advisory Service