Overview
On 22 November 2023, Chancellor Jeremy Hunt presented his Autumn Statement (mini Budget). The main points to note are that cuts in National Insurance have been announced, for both employees and the self-employed, and the minimum wage is to increase to £11.44/hour. Both of these are clearly good news for workers. But there wasn’t really much else that is particularly relevant to most of our corporate clients.
For employees
In addition to income tax, all employees earning more than £12,570 a year pay Class 1 NICs. The main rate of Class 1 NICs will be cut from 12% to 10% from 6 January 2024. This will come into effect from January 2024. The impact of this will be that an ‘average. worker earning £35k will be about £450 better off. Note that the Class 1 NIC rate will remain at 2% for earnings above £50,270 a year. Similarly, there are no changes to the rate of employer’s Class 1 NICs, which remains at 13.8%.
For the self-employed
Self-employed individuals with profits of more than £12,570 a year currently pay two types of NIC: Class 2 and Class 4.
- Class 2 NICs have been at a flat rate sum of £179.40 a year (£3.45 a week) in 2023/24 but no one will be required to pay the charge from 6 April 2024.
- The main rate of Class 4 NICs will be cut from 9% to 8% from 6 April 2024. Class 4 NICs will continue to be calculated at 2% on profits over £50,270.
Taken together these changes will result in an average self-employed person with profits of £28,200 saving £336 in 2024/25.
Class 2 NICs currently provide the self-employed with access to a range of state benefits, including the State Pension. From 6 April 2024, self-employed people with annual profits;
- Above £12,570 – will continue to receive access to the benefits.
- Between £6,725 and £12,570 – will continue to receive access to the benefits, via a National Insurance credit.
- Under £6,725 (or with losses) – will be able to continue to pay Class 2 NICs on a voluntary basis in order to maintain their access to state benefits. Class 2 NICs had been due to increase in 2024/25 but it seems that these will be maintained at the current £3.45 weekly level for those in this bracket.
National Minimum Wage (NMW)
From 1 April 2024 the minimum pay rates will increase and be as follows:
| NMW rate £ | Increase £ | Increase % | |
| National Living Wage (age 21 and over) | 11.44 | 1.02 | 9.8 |
| 18-20 year old rate | 8.60 | 1.11 | 14.8 |
| 16-17 year old rate | 6.40 | 1.12 | 21.2 |
| Apprentice rate | 6.40 | 1.12 | 21.2 |
Tax Relief for expenditure on plant and machinery
The Annual Investment Allowance (AIA) is now permanently set at £1million. This means that businesses can claim tax relief at 100% on up to £1million of expenditure on qualifying plant and machinery (e.g. capital equipment).
‘Full expensing’ is an additional and alternative relief for companies only. It allows unlimited 100% upfront tax relief on qualifying plant and machinery that is purchased in a new condition on or after 1 April 2023. There is also an associated 50% allowance for expenditure on certain types of plant and machinery that does not qualify for the full 100% (including space and water heating systems, for example).
Making Tax Digital (MTD) for Income Tax
Under MTD for income tax, businesses will keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. These requirements will be phased in from April 2026, starting with sole traders and property landlords with gross income over £50,000.
Business Rates
A new business rates support package worth £4.3 billion will be made available over the next five years to support small businesses and the high street. For 2024/25, the small business multiplier will continue to be frozen and the 75% Retail, Hospitality and Leisure business rates relief will continue to apply.
Using the cash basis to compute business profits
The ‘cash basis’ can be a simplified way of calculating taxable profits for income tax purposes. It is based on simply declaring income received and expenses paid, without adjustments seen in more sophisticated accounts prepared in accordance with traditional ‘accruals based’ principles (e.g. to include adjustments for stock valuations and amounts owed by customers). The cash basis is currently an option for sole traders and partnerships if their annual business turnover is £150,000 or less.
In a significant shift from 6 April 2024, the cash basis will become the default accounting basis for all unincorporated businesses. The £150,000 turnover limit will be removed and some of the restrictions within the current regime that limit relief for interest deductions and loss relief will also be removed.
Businesses can ‘opt out’ of the cash basis and continue to prepare a balance sheet and use the ‘accruals basis’ if they wish.
Investment Zones and Freeports
Earlier this year, the government announced that it would establish 12 ‘Investment Zones’ across the UK. These Zones target tax and other incentives on high potential industry sectors to boost productivity and growth. A number of the Zones have now been announced and the Chancellor has now pledged to extend the program of funding and tax reliefs for these Zones from 5 to 10 years.
The tax incentives include relief from Stamp Duty Land Tax (SDLT), enhanced capital allowances for plant and machinery, enhanced structures and buildings allowances, business rates relief and reduced employer NICs on the earnings of eligible employees.
VAT
The VAT registration and deregistration thresholds continue to be frozen at £85,000 and £83,000 respectively, instead of increasing each year in line with inflation. This is thought to be a blocker to growth in small businesses and so will be one to watch in the Spring Budget next year. There have been no change to rates of VAT.
Income tax
‘Stealth’ increases
The personal allowance and basic rate band threshold are still frozen at their 2021/22 levels and, subject to the outcome of the next general election, are expected to remain at such until 5 April 2028. As earnings increase, individuals will move into higher tax bands. This is often referred to as ‘fiscal drag’ because it will raise more tax without the government increasing income tax rates. The tax-free personal allowance of £12,570 continues to be partially and then fully withdrawn for higher earners, with £1 of personal allowance lost for every £2 of adjusted net income over £100,000.
Income tax rates and allowances for 2024/25
The following income tax rates will continue to apply to taxable income, after the £12,570 personal allowance has been utilised.
| Band | Taxable Income | Tax rate in 2024/25 | ||
| Earned income (e.g. wages, business profits and rental profits) | Savings income | Dividend income | ||
| Basic rate | £0 – £37,700 | 20% | 20% | 8.75% |
| Higher rate | £37,701 – £125,140 | 40% | 40% | 33.75% |
| Additional rate | Over £125,140 | 45% | 45% | 39.35% |
Other allowances
Savings income continues to benefit from a 0% personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
Dividend income attracts a 0% dividend allowance of £500 in 2024/25, down from the £1,000 allowance seen in 2023/24.
Tax Efficient Savings
The annual limits for Individual Savings Accounts (ISAs), Child Trust Funds and the Junior ISA remain at £20,000, £9,000 and £9,000 respectively in 2024/25. The lifetime ISA annual subscription limit also remains unchanged at £4,000 (excluding the government top-up bonus).
Pension tax relief
Annual allowances determine the maximum amount that an individual can save into their pension pots in a tax year before tax relief starts to be withdrawn by way of pension tax charges. These allowances will remain fixed in 2024/25 at their 2023/24 rates, being the £60,000 annual allowance applicable in most circumstances and the £10,000 money purchase annual allowance for those who have flexibly accessed their pension pot. The annual allowance is reduced for those with a high income of more than £260,000.
Capital Gains Tax
The capital gains tax annual exemption is set to drop to £3,000 in 2024/25, down from £6,000 in 2023/24. This change will mean that those selling capital assets such as property or shares will pay more tax, where the new lower annual exemption is exceeded. Capital gains tax rates range from 10% to 28% in 2023/24, depending on the tax status of the seller and the type of asset sold.
Inheritance Tax
The inheritance tax nil rate band continues to be frozen at £325,000 until April 2028. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2million.
Corporate taxes
Rates from 1 April 2024
From 1 April 2024, the rate of Corporation Tax will continue to be 25% if a company’s profits exceed £250,000 a year. The small profits rate of 19% will apply where profits are no more than £50,000 a year. Where a company’s profits fall between £50,000 and £250,000 a year, the profits are taxed at the higher 25% rate, but a ‘marginal relief’ is given to reduce the liability, with the effective rate being closer to 19% the closer profits are to £50,000.
Research & Development (R&D) Reliefs
For company accounting periods commencing on or after 1 April 2024, a new R&D scheme for limited companies will come into effect, merging the current R&D Expenditure Credit (RDEC) scheme (for larger companies) with the Small and Medium Enterprise (SME) scheme. There will also be a second new R&D scheme for ‘R&D intensive SMEs’. Within the new rules there are new provisions in relation to:
- Who can claim relief when companies contract out R&D activities;
- The definition of qualifying expenditure, taking into account whether the R&D has been undertaken in the UK,
- The qualifying criteria for ‘R&D intensive’ companies, along with a new approach for companies who many fluctuate in and out of the status; and
- Restrictions on nominations and assignments of R&D relief payments.
Any company claiming (or considering claiming) R&D reliefs will need enhanced support to both ensure compliance and to adopt the new rules and framework.
In conclusion
As we move into 2024, there are a lot of tax changes already scheduled, plus we can expect more with a Spring Budget and a general election on the horizon. How short lived these changes will be, will depend on the election.
Upcoming tax events
| Date | What’s Due |
| 1/12/23 | Corporation tax payment for the year to 28/2/23 (unless quarterly instalments apply) |
| 19/12/23 | Employer PAYE & NIC deductions, and CIS return and tax, for the month to 5/12/23 (due 22/12/23 if you pay electronically) |
| 30/12/23 | Submission of 2023/24 self-assessment return (if the taxpayer wants HMRC to collect the tax owed through their wages or pension) |
| 1/1/24 | Corporation tax payment for the year to 31/3/23 (unless quarterly instalments apply) |
| 19/1/24 | Employer PAYE & NIC deductions, and CIS return and tax, for the month to 5/1/24 (due 22/1/24 if you pay electronically) |
| 31/1/24 | Submission of 2023/24 self-assessment return |
Overview On 22 November 2023, Chancellor Jeremy Hunt pr […]