The Autumn Statement Key Updates | What was announced?

The Chancellor of the Exchequer (Jeremy Hunt) delivered his autumn statement today with it having been widely predicted that tax cuts of some kind would be announced, with National Insurance and Inheritance Tax specifically being mentioned.

As usual the speech started with commentary on the general economic situation, with the Chancellor explained that it is expected inflation will continue to fall, but not as quickly as had been previously thought.  The rate is expected to be around 2.8% by the end of 2024, and return to its target rate of 2% during 2025.

The targets for economic growth in the next two years have been downgraded since the previous targets were announced in the March 2023 budget.  The growth in GDP during 2024 is expected to be 0.7% (previously 1.8%) and growth in 2025 expected to be 1.4% (previously 2.5%).

It was announced that the general increase in benefit payments in April 2024 will be 6.7%, the rate of inflation in September 2023.  It had been feared that the increase might be based instead on the much lower inflation rate of 4.6% in October 2023.

The National Living Wage will increase in April 2024 from £10.42 per hour to £11.44 per hour, and it will be extended to 21 year olds (currently is applies for those aged 23 or more)

Pensions

The state pension will continue to be increased under the ‘triple lock’ rules, meaning an increase in payment of 8.5% in April 2024.  It means the basic pension for those who reached pension age after 5 April 2016 with a full contribution record will see their monthly payment increase to £221.20 per week (it is currently £203.85 per week).

It was confirmed that legislation will be introduced to remove the lifetime limit for pension funds, which was announced in March 2023.

Then government are also looking into giving people a single pension fund for life, giving a legal right requiring a new employer to make pension contributions into an existing pension scheme of a new employee.

Business taxes

Capital allowances

The current capital allowances regime for companies that allows 100% write-off of all capital expenditure on qualifying assets for corporation tax purposes is to be made indefinite.  It is presently set to expire on 31 March 2026.

For non corporate businesses that are subject to income tax rather than corporation tax, the current limit of £1 million for 100% annual investment allowances is also to be become permanent.

For expenditure on assets that qualify for special rate allowances, there is a 50% write off allowed in the year of purchase followed by 6% per annum in subsequent years.

 
Cash accounting

For smaller business the availability of cash accounting is to be extended and some of the rules regarding tax relief relaxed.  The turnover limit for business to be able to use the cash basis is to be removed completely, on the grounds that most larger businesses will not use it anyway as the accruals basis of accounting is more appropriate for them.  The default rule will be that accounts should be prepared on a cash basis, with businesses having to elect to use accruals accounting.

To make the use of cash accounting more attractive for a larger number of businesses, the limit of £500 for tax relief on interest payments is to be abolished, and there will be a relaxation of the rules that restrict loss relief for accounts prepared on a cash basis, with the rules being aligned to those for accounts prepared on an accruals basis.

These new rules will also apply for partners in trading partnerships.

The changes to cash accounting rules will come into effect in April 2024 for the tax year ending on 5 April 2025.

Making Tax Digital

It was confirmed that sold traders and landlords with turnover of more than £50,000 will have to join MTD in April 2026, and those with turnover of more than £30,000 will join in April 2027.  There is at present no decision made on if and when those with turnover of less than £30,000 will have to join.

It is proposed that the quarterly returns mandated under MTD will become updated cumulative year to date reports, which will remove the need for submitting corrections to previous quarters returns if errors are found. Those taxpayers with turnover below the VAT threshold will be able to submit simple 3-line quarterly reports.

It has also been decided to remove the requirement to submit an End of Period statement after the end of each tax year, removing one of the filings previously required.

Research and development tax credits

The present separate regimes for large companies and small and medium companies are to be combined into a single scheme, and this change will take effect for accounting periods commencing on or after 1 April 2024.  Previously the change was intended to take effect for expenditure incurred after 1 April 2024 which introduced complications for businesses that do not have a 31 March year end.

Business rates

The 75% business rates discount for retail, hospitality and leisure businesses will be extended for another year and continue for the year ended 31 March 2025.  The multiplier used for small businesses has also been frozen again for the year ended 31 March 2025.

Personal tax changes

National Insurance for employees

It was announced that will effect from 6 January 2024 the rate of employees National Insurance on earnings between £12,570 and £50,270 per year will be reduced from 12% to 10%.

This will be done via emergency legislation that has not yet been published so there is little information on exactly how this will work.

Where employers are unable to implement changes to their payroll software in time to enable the benefit of the NI reduction to be given in the January payroll, employers will have to rectify this is later months to ensure the full benefit of the reduction goes to the employees.
National Insurance for the self-employed

It was announced that with effect from 6 April 2024 Class 2 National Insurance for the self-employed is to be abolished completely and the rate of Class 4 national Insurance on profits between £12,570 and £50,270 is to be reduced from 9% to 8%.

Because entitlement to benefits and state pensions for the self-employed is tied to their Class 2 National Insurance payments, changes will be made to how this is calculated and anyone whose profits are more than £6,725 will receive a National Insurance credit automatically.  Those with profits of less than £6,725 will be able to voluntarily continue to pay Class 1 National Insurance to maintain their benefit entitlements.

Other personal tax changes

It will no longer be necessary for anyone who only receives income tax under PAYE to complete a self-assessment tax return.  At present this only applies to such individuals whose income is less than £150,000.

The existing schemes relating to reliefs for investments in Enterprise Investment Schemes and Venture Capital Trust are to be extended until 31 March 2035.

Changes are to be made to the rules surrounding ISA’s to simplify their administration and to allow individuals to subscribe to more than one type of ISA in a year, providing their total investment is within the annual limit.