Tax E-News Autumn Statement
On 22 November 2023, Chancellor Jeremy Hunt presented his Autumn Statement to Parliament and started making, in his words, the long-term decisions necessary to strengthen the economy and build a brighter future. Fuelled by falling inflation and stabilised public finances, focus is now being applied to reducing debt, cutting tax and rewarding hard work.
Below we set out some of the main points.
CUTTING TAX AND REWARDING HARD WORK
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 and, over a full year, the average worker on £35,400 will receive a NIC reduction of over £450. Workers earning more than £50,270 a year will receive a NIC reduction of £754 …
STATE BENEFITS
The government will uprate all working age benefits for 2024/25 by the September 2023 Consumer Price Index (CPI) of 6.7% and will continue to protect pensioner incomes by maintaining the promised ‘triple lock’ …
NATIONAL MINIMUM WAGE (NMW)
The biggest ever increase to the National Living Wage has been announced, with the government fully accepting the recommendations made by the Low Pay Commission. Eligibility for the National Living Wage will also be extended by reducing the age threshold to 21-year-olds for the first time …
BACKING BRITISH BUSINESS
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) …
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 …
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 …
PENSION REFORM
The government has announced a comprehensive package of pension reforms that aim to provide better outcomes for savers, drive a more consolidated pensions market and enable pension funds to invest in a diverse portfolio …
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 …
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 …
EMPLOYMENT TAXES
National Insurance Contributions (NICs)
Like the main income tax bandings, employer and employee NIC thresholds are now also frozen until 5 April 2028. This broadly means that, in 2024/25, employers’ NIC will continue to apply at 13.8% to earnings in excess of £9,100 a year …
TACKLING THE TAX GAP AND COLLECTING HMRC DEBT
The government continues to commit to a tax system that is easy for businesses and individuals to engage with, and where everyone pays their fair share …
TAX ADMINISTRATION FRAMEWORK
New measures will be introduced to strengthen HMRC’s data gathering powers. From 2025/26:
• Employers will be required to provide data on employee hours paid as part of their PAYE reporting; and …
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.