Navigating the Fiscal Landscape: A Deep Dive into the Autumn Statement 2023
Written by:
Sophie Daykin
Co-founder & Tax Partner
Navigating the Fiscal Landscape: A Deep Dive into the Autumn Statement 2023
The unveiling of the Autumn Statement by Chancellor Jeremy Hunt, accompanied by an updated economic forecast from the Office for Budget Responsibility, has laid out the trajectory for the UK's economic policies. Let's delve into the key announcements that will shape the fiscal landscape in the coming years.
Business Taxation: A Stable Outlook
Corporation Tax
No further changes to the rates, providing a stable environment for businesses.
Capital Allowances
The shift from the super deduction regime to 'full expensing' introduced in Spring Budget 2023 is now set to become a permanent fixture. A 100% first-year allowance for main rate assets and 50% for special rate assets signifies a long-term commitment to supporting business investments in plant and machinery.
Research & Development: Empowering Innovation
The merger of the Research and Development Expenditure Credit (RDEC) and SME schemes is a significant move. From April 2024, loss-makers in the merged scheme will see a reduction in the notional tax rate from 25% to 19%. The intensity threshold for additional support to R&D-intensive SMEs will decrease from 40% to 30%, encompassing around 5,000 more SMEs. The introduction of a one-year grace period ensures continuity for companies temporarily falling below the threshold.
OECD Pillar Two
Implementation of the OECD Pillar Two Undertaxed Profits Rule from December 2024 aligns with the global minimum tax framework, ensuring multinational enterprises face a minimum 15% effective tax rate across jurisdictions.
Investment Zones and Business Rates: Fueling Growth
Investment Zones Programme
A commendable extension from five to ten years, with three new zones announced in Greater Manchester, West Midlands, and East Midlands, highlighting the importance of regional growth.
Business Rates Support
A £4.3 billion support package over the next five years is aimed at aiding small businesses and the Retail, Hospitality, and Leisure (RHL) sector. This includes an extension of the 75% relief for RHL in 2024-25, capped at £110,000, and a freeze on the small business multiplier for the fourth consecutive year.
Enterprise Incentives: Fostering Investment
EIS and VCT Reliefs
Legislation will be introduced to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) reliefs to 2035, providing a continued incentive for investment.
ATED
Annual charges for Annual Tax on Enveloped Dwellings will see a 6.7% increase from April 2024.
Personal Tax and National Insurance: A Balancing Act
Income Tax
No changes to income tax rates or thresholds.
National Minimum and Living Wage
A noteworthy 9.8% increase in the National Living Wage to £11.44 per hour for eligible workers aged 21 and over from April 2024.
National Insurance Contributions
Reduction in the main rate of Class 1 employee NICs from 12% to 10% and a decrease in the rate of Class 4 NICs for the self-employed from 9% to 8% from 2024. Abolition of Class 2 NICs for the self-employed from April 2024.
Other Changes: Streamlining Processes
- Expansion and simplification of the income tax cash basis for the self-employed and partnerships from April 2024.
- Individuals with income taxed only through PAYE won't be required to file a Self Assessment return from 2024-25.
- Making Tax Digital (MTD) will proceed for self-employed individuals and landlords with annual income over £50,000 from April 2026, followed by those with income over £30,000 from April 2027.
Pension Reforms: A Comprehensive Overhaul
A comprehensive package of pension reforms aims to improve outcomes for savers, consolidate the pensions market, and enable diverse portfolio investments. The authorised surplus repayment charge will be reduced from 35% to 25% from April 2024, and the triple lock on the new state pension will result in an 8.5% increase to £11,500 per year from April 2024.
Indirect Taxes and Duties: A Balanced Approach
VAT
Expanding the scope of zero-rated VAT on Women's Sanitary Products and Energy-Saving Materials in an attempt to demonstrate a commitment to inclusivity and sustainability. The freeze on alcohol duties until August 2024, alongside increases in tobacco duties, reflects a nuanced approach.
HGV Levy and Vehicle Excise Duty
A freeze on HGV Levy and Vehicle Excise Duty rates for HGVs, coupled with an uprating of Vehicle Excise Duty rates for cars, vans, and motorcycles in line with RPI from April 2024, aims to balance economic considerations and environmental impacts.
Green Taxes
A mix of freezes, increases, and new initiatives in green taxes.
In summary, the Autumn Statement 2023 paints a comprehensive picture of the government's economic strategy, focusing on stability, innovation, regional growth, and sustainability. As businesses and individuals prepare for the changes ahead, the overarching theme is one of adaptability and resilience in the face of evolving fiscal landscapes.
