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The Budget - 23 November 2023

Overview

On 22 November 2023, the Chancellor delivered his Autumn Statement, which differs from a budget. The budget is another UK government 'fiscal event' held around March each year. Jeremy Hunt said in his Autumn Statement that as a result of 'eight months of hard work' he has been able to include 110 measures to 'help grow the British economy'.

Yet, as we approach a general election, the Autumn Statement did have a higher status than usual as it is probably the last time that the UK Government can make an impact on the pockets of individuals and businesses. The reason for this is that the measures in the statement will be effective from the start of the tax year in 2024, unlike measures in a budget, which are, really statements of future intentions.

ALTHOUGH! One of the measures takes place within the current tax year. It's unusual, but it's happened before. If you do payrolls as part of your service, please take note of the section that talks about employees' National Insurance.

We discuss them in more detail below, but the measures have yet to be confirmed by legislation. Don't forget that there are still the Scottish and Welsh Budgets to consider, both on 19 December 2023. These will focus on the things that are devolved or shared with them, such as Stamp Duty (Land Transaction Tax (LTT) in Wales and Land and Buildings Transaction Tax (LBTT) in Scotland) and Income Tax. If the UK Government in Westminster announces extra spending that is for England only, the devolved nations will receive a 'share' - hence why their budgets are held after the Autumn Statement

So, we do not have a full UK picture because of the 2023 Autumn Statement. But we have a good one, nonetheless. Do note that prominent in the Autumn Statement, is the announcement that HMRC have been allocated more funds to tackle non-compliance.

Over the next few weeks and months, more information will be released, which we will make available on our monthly tax tips newsletters.

Employment Taxes

The Requirement to File a Self-Assessment Return

The government will legislate so that individuals who only have PAYE income do not have to complete a tax return.

Tax Avoidance

Promoters of tax avoidance schemes will be subject to a new criminal offence, which will allow HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance.

Construction Industry Scheme (CIS)

The CIS scheme is being reformed regarding the Gross Payment Status (GPS) compliance test. The GPS is where a contractor can pay without a deduction of CIS tax. HMRC has been concerned that this status is being used too much, and the reforms will include measures to allow HMRC to withdraw this status where fraud is detected.

Income Tax

Many of the personal allowances have been frozen until 2028, bringing some people into the tax system for the first time. The Autumn Statement did not announce any let-up to this but did confirm that the Blind Person's Allowance (BPA) and the Married Couple's Allowance (MCA) will be uprated for 2024/25.

There was no change to the main rates of Income Tax (20%, 40% and 45%) or the thresholds, which have also been frozen until 2028. But this must be considered with the fact that powers are shared with Wales and Scotland:

  • Wales has the power to vary Income Tax percentages in line with the tax bands that apply in England and Northern Ireland
  • Scotland has greater powers to set its own Income Tax rates and bands.

So, we must wait until their budgets on 19 December 2023 to get the complete UK picture.

Company Car and Van Charges

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.

National Insurance

Perhaps the biggest announcements were regarding National Insurance that applies 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 in 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.

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.

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. But where the profit is above £6,725, contributory benefits, including the State Pension, can still be accessed even though no NI is payable.

Where profits are below £6,725, contributory benefits, including the State Pension, can still be accessed 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 £12,570 and £50,270). The rate between these thresholds is 9% in 2023/24, and it will reduce to 8% in 2024/25.

National Insurance Contributions Rates and Thresholds

For the 2024/25 tax year, all rates and thresholds remain unchanged, remembering that the main rate employees pay has been reduced to 10% from 06 January 2024.

Employment Allowance

This is the amount that certain employers can claim from HMRC and use to offset their National Insurance liability. There was no mention of this in the Autumn Statement or any accompanying documents; therefore, this remains at £5,000 for eligible employers.

Apprenticeship Levy

This is used to fund apprenticeship training in England and is a cost to employers. There was no mention of changes; therefore, the following apply in the tax year 2024/25:

  • Levy Allowance (per employer) £15,000
  • Levy Charge 0.5% of the paybill

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.

Pensions

The Chancellor announced the 'pot for life' or portable pension pot, subject to another consultation. This is to address the many small pension pots that exist as workers move from job to job, leaving different unconsolidated pensions.

Now, employers are obliged to automatically enrol workers into a scheme chosen by the employer. As workers move on, this has increased the number of small pots being left behind. The proposal is that the worker will automatically 'take' their pension pot from their former employer's scheme to the new employer's scheme, subject to criteria, of course. There will be a legal obligation for the new employer to pay into a pension pot that is from a former employer.

Workers will still be able to opt out of this portable pension and leave their pension pot in the former employer's scheme.

State Pension

Included in the Conservative Party Manifesto pledge in 2019 was a promise to maintain the Triple Lock, the mechanism by which the State Pension is raised each year. Convention had it that the pension would increase by 8.5% (earnings inflation), though this was inflated by one-off payments and bonuses paid to employees in the NHS and civil service. True earnings inflation was a lower 7.8%, and, possibly, the government would use this lower figure to inflate State Pensions.

But the Autumn Statement announced that the Triple Lock commitment would be honoured, and increases would be at 8.5%.

Individuals

Universal Credit

Universal Credit will increase in line with September's inflation rate of 6.7%. This also applies to working-age benefits, means-tested benefits, and disability benefits.

Alcohol Duty

In other news, it has been announced that there will be a freeze on alcohol duty.

Individual Savings Accounts (ISAs)

The ISA allowance limit of £20,000 has not changed since 2017 and the Autumn Statement froze this for tax year 2024/25.

The following are also frozen:

  • Junior Individual Savings Account (£9,000),
  • Lifetime Individual Savings Account (£4,000 excluding government bonus) and
  • Child Trust Fund (£9,000)

Capital Gains Tax

No mention was made of Capital Gains Tax; however, we know that the annual exemption will be cut in half to £3,000 on 06 April 2024, with the exemption for trusts set at half that level: £1500.

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 in Corporation Tax rates, 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
  2. 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. Furthermore, 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 at a later date as they are not currently available.

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 that there could be 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 or 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 landfills, the lower the tax. As announced already in 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

Value Added Tax

From 1 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.

Other

Business Rates (England)

For tax year 2024/25, the small business multiplier in England will be frozen at 49.9p, while the standard multiplier will be uprated to 54.6p. The current 75% relief for eligible Retail, Hospitality and Leisure (RHL) properties is being extended into 2024/25.

Expanding Cash Accounting

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

  • 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.

HMRC 'Data Gaps'

HMRC have long said that they need more information from employers, company directors, and the self-employed to fill gaps in the data they hold. The following provisions will come into force in the tax year 2025/26:

  • Dividends Paid to Shareholders in Owner-Managed Businesses (via tax returns)
  • The Start and End Dates of Self-Employment (via tax returns), and
  • The Hours Employees Work (via RTI payroll submissions)

Details will be provided in the Autumn Finance Bill, and we will keep you updated on these new information requirements.

Freeport Tax Relief

For eligible employers operating in designated Freeport zones, they can claim certain tax reliefs that are not available to other employers, for example, relief from Stamp Duty. The deadline to claim these reliefs has been extended by 5 years to September 2031.

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