Here are the key tax points from yesterday’s Autumn Statement.
- National Insurance Contributions (“NIC”)
From 6 January 2024 the employee NIC rate is cut 12% to 10%.Employers need to watch the 9.8% increase to the national living wage (up to £11.44 per hour) from 1 April 2024. The age threshold for the national living wage is also being reduced to 21 from 23 years. Also from 1 April 2024, the national minimum wage is to be increased to £8.60 per hour for 16 to 17 year olds and to £6.40 per hour for apprentices.For self-employed individuals and members of partnerships, the main rate of Class 4 NIC’s will reduce from 9% to 8%. This will apply from 6 April 2024.
Also relevant for the self-employed and members of partnerships is the effective abolition of Class 2 NIC. For those with profits over £6,725 Class 2 NIC will no longer be payable and access to contributory benefits (namely, the State Pension) will be unaffected. For those with profits under £6,725, it will still be possible to pay Class 2 NIC to ensure future entitlement to the State Pension.
- Capital Allowances and other Business Taxes
The ‘full expensing’ allowance is now permanent (this was originally planned to end on 31 March 2026). This only applies to limited companies and sits alongside the ‘Annual Investment Allowance’ (currently limited to £1m each year). Although full expensing is uncapped, it cannot be claimed in respect of second-hand assets or cars and only applies to ‘main rate’ expenditure. Annual Investment Allowance is still therefore useful for assets that do not qualify for full expensing.For ‘special rate’ expenditure incurred by companies (namely, ‘integral features’ in a building like cold water systems, ventilation, lifts etc.) this does not qualify for full expensing but the 50% first year allowance is being retained. However, for most companies, it will continue to be preferable to claim Annual Investment Allowance on expenditure of this nature.
Investment zones and the associated tax reliefs available are to be extended from five to ten years. Four new zones were announced (greater Manchester, West Midlands, East Midlands and Wrexham & Flintshire in Wales).
The government are to consult with industry on how capital allowances can be simplified.
As for business rates, the small business multiplier (for England) for 24/25 will remain frozen at 49.9p. The 75% relief for eligible Retail, Hospitality and Leisure properties is being extended to 24/25.
- Research and Development Tax Relief
The two existing schemes, RDEC (formerly the ‘large company’ scheme) and the SME scheme, are to be merged. The single scheme is to come into effect from 1 April 2024.
The merged scheme operates in a very similar way to the existing RDEC scheme. The merged scheme provides an ‘above the line’ credit of 20% on their qualifying expenditure, however the credit is subject to Corporation Tax. For loss makers, the notional tax on the credit will be 19%, rather than the 25% main rate.
For those claimant companies making claims under the SME scheme, the ‘grossing up’ of qualifying expenditure is no longer available as this was a feature specific to the SME regime and not RDEC. The policy paper does however say that “in a further simplification, the rules relating to subsidised expenditure in the existing SME scheme will not be carried forward into the new merged scheme, meaning that where a company receives a grant covering part of the costs of their R&D (for example), the amount of relief available will not be reduced.”, which will be helpful for SME claimants whom, in the past, were not able to receive additional tax relief on costs where all or part of that expense was met by grant funding.
R&D claimant companies will also no longer be able to nominate a third-party payee for the relief payment, such as an accountant or R&D advisor. Only the claimant company themselves will receive the tax credits and no new assignments of the credit will be possible from 22 November for claims under the existing R&D regimes.
- Other Announcements:
HMRC are to re-write guidance around the deductibility of training costs incurred by self-employed individuals.An additional £163m of funding for HMRC to help them better collect and manage tax debts – the government’s official paper talks about how this money will be used to “better distinguish between those who can afford to settle their tax debts, but choose not to, from those who are temporarily unable to pay and need support”.
A pledge that individuals with only PAYE income will not be required to file Tax Returns from 2024/25 onwards. It remains to be seen how this will impact taxpayers, for example, whose PAYE codes do not collect the correct amount of tax.
Alcohol duty frozen until 1 August 2024.
A consultation on new proposed permitted development right for homes to be subdivided into two flats, where the frontage remains unchanged.
State Pension ‘triple lock’ retained, with State Pension set to increase by 8.5% in April 2024.
The government and HMRC are still determined to press on with Making Tax Digital (“MTD”) for Income Tax. The existing mandatory income thresholds for MTD registration (£50K at April 2026 and £30K at April 2027) were retained and the government are still monitoring what best to do about those taxpayers with rental profits or business profits under £30K. One change is that each ‘quarterly update’ will be a cumulative total of income and expenditure accumulated during the tax year, rather than the income and expenditure in that quarter. For landlords with joint property, the government have announced landlords can choose not to submit quarterly updates for jointly owned lets.
EIS and VCT schemes extended. The legislation for the schemes contains a ‘sunset clause’ which is effectively an expiry date on when the relief can be claimed. This is extended to 6th April 2035 so investors can continue to invest in shares qualifying for these reliefs up to then.
Legislation is being introduced so that owner-managers have to report dividends from their own company separately to other dividends (for example, those from an investment portfolio) on their personal Tax Returns. There is also a requirement for taxpayers to show the percentage share of the company on their personal Tax Return. This legislation will have effect no earlier than from the start of the 2025/26 tax year.
How Churchgates can help
For business owners and managers navigating the Autumn Statement’s tax changes, Churchgates offers more than just information; we provide proactive advice to help you adapt your business effectively. New clients, please call 01284 701271 for a consultation. Existing clients, contact your usual representative to discuss personalised strategies.
