As the autumn leaves fall, so does the latest fiscal roadmap for the United Kingdom, outlined in the Autumn Statement 2023. Here, we take a look at the precise changes and new rules introduced in the statement, providing an overview of how these adjustments will impact both individuals and businesses across the country.
Business Related Tax Changes
Capital Allowances
During the Spring Budget 2023, the government opted to replace the super deduction regime with ‘full expensing,’ effective for a three-year period starting from April 1, 2023. This provision enables businesses to deduct the entire cost of qualifying plant and machinery investments from their taxable profits.
Building on this in the Autumn Statement 2023, the government has decided to make this change a permanent fixture by introducing a 100% first-year allowance for main rate assets and a 50% first-year allowance for special rate assets, including long-life assets.
Business Rates
The government is set to roll out a business rates support package totalling £4.3 billion over the next five years, aimed at providing assistance to small businesses as well as the Retail, Hospitality, and Leisure (RHL) sectors.
This initiative encompasses the extension of the 75% relief for RHL until 2024-25, capped at £110,000 in cash terms. Additionally, the small business multiplier will remain frozen for the fourth consecutive year, while the standard rate multiplier will be adjusted to align with CPI inflation.
ATED (Annual Tax on Enveloped Dwellings)
From April 1, 2024, annual charges for ATED (Annual Tax on Enveloped Dwellings) will experience a 6.7% increment, mirroring the Consumer Price Index as of September 2023. ATED is a tax in the UK levied on residential properties owned by companies, partnerships with corporate members, or collective investment schemes. This tax is applicable to dwellings meeting certain criteria and is designed to discourage the holding of high-value residential properties within corporate envelopes. The increase in annual charges aligns with the inflationary trends measured by the Consumer Price Index.
Investment Zones
The Investment Zones initiative is set to undergo an extension, doubling its duration from five to ten years. Furthermore, the expansion of this program encompasses the introduction of three new zones located in Greater Manchester, West Midlands, and East Midlands. This strategic move aims to broaden the reach and impact of the Investment Zones, fostering economic growth and development in these newly designated regions.
Research and Development
The current Research and Development Expenditure Credit (RDEC) and SME schemes are slated for consolidation, effective for expenditure incurred in accounting periods starting on or after April 1, 2024. Under the merged scheme, the notional tax rate applied to entities incurring losses will be reduced from the existing 25%, aligned with the RDEC scheme, to a new rate of 19%. This initiative seeks to streamline and enhance the effectiveness of R&D incentives.
The intensity threshold in the supplementary support for R&D-intensive loss-making SMEs will undergo a reduction also, shifting from 40% to 30%. This adjustment is expected to encompass around 5,000 additional R&D-intensive SMEs, making them eligible for the relief. Moreover, a one-year grace period will be instituted, allowing companies that fall below the 30% qualifying R&D expenditure threshold to still avail relief for the subsequent year. This change aims to broaden the scope of support and provide transitional assistance for eligible businesses.
Changes to Personal Tax and NI
National Insurance
The main rate of National Insurance (Class 1 NI) for employees is set to be cut from 12% to 10% from 6 January 2024. The Chancellor advised that this means for a person earning an average UK salary of £35,4000 per annum, a saving of £450 would be observed in 2024-25.
In addition, the NI rate for self-employed individuals (Class 4 NI) will be cut from 9% to 8%, taking effect in April 2024. The Chancellor gave an example of the savings this would bring by explaining that a self-employed person with profits of £28,200 would save an average of £350 during 2024-25.
Surprisingly, Class 2 National Insurance (paid by those self-employed who do not pay through self-assessment) is to be abolished from April 2024 – this was previously charged at £3.45 per week.
National Living Wage
From April 2024, the National Living Wage will be increased by £1.02 per hour from £10.42 to £11.44 for those aged 21 and over, meeting the criteria.
This increase will also mean benefits such as Universal Credit and other working age benefits will increase by 6.7%.
Pensions
In April, state pensions will see an 8.5% increase, and the ‘triple-lock’ mechanism, which ensures state pension rises by the highest among inflation, wage growth, or 2.5%, will be retained.
The Autumn Statement 2023 is not just a fiscal forecast but a blueprint for economic transformation. Understanding the specifics of the changes introduced is crucial for individuals and businesses alike.
As we navigate this new landscape, adaptability and strategic planning will be key to capitalising on opportunities and mitigating challenges. Contact our professional team today to find out how we can help.