Significant Changes in the Autumn Statement
In the recent Autumn Finance Bill, significant changes have been announced that will impact businesses and individuals alike. The ‘Full Expensing’ deduction, which allows companies to claim a 100% first-year deduction on qualifying new investments, will now be made permanent, removing the previous 2026 end date. This move is aimed at encouraging companies to invest in main-rate plant and machinery, thus stimulating growth and innovation.
Another important development is the Annual Investment Allowance, which will remain at a permanent rate of £1 million from April 2023. This allowance provides businesses with the opportunity to claim tax relief on their qualifying investments, fostering further investment and economic activity.
Income Tax Thresholds and National Insurance Rates
Turning our attention to individuals, the income tax thresholds will be frozen until April 2028. This means that the personal allowance, basic rate, and higher-rate thresholds will remain at £12,570 and £50,270 respectively. However, it is worth noting that the additional rate threshold will be reduced from £150,000 to £125,140 from 6 April 2023.
National insurance thresholds for all classes will also be frozen until April 2028. However, there will be a reduction in the rate of Class 4 NICs on earnings between £12,570 and £50,270, from 9% to 8% starting from April 2024. Additionally, Class 1 contributions for employees will be reduced from 12% to 10% from 6 January 2024.
In terms of capital gains tax, the annual exemption amount for individuals will be reduced from £12,300 to £6,000 from April 2023, and further reduced to £3,000 from April 2024. This change may have implications for individuals who engage in capital gains activities.
Lastly, the National Minimum Wage will increase to £11.44 an hour for those aged 21 and over from 1 April 2024. This increase aims to ensure fair compensation for workers and promote a thriving workforce.
State Pension Boost and Pensions Reform
Pensioners can rejoice as the state pension is set to receive a noteworthy increase for the second consecutive year. Starting from April 2024, recipients will enjoy an additional £900 annually, resulting in an 8.5% rise. This means that the full new state pension will reach £221.20 per week or £11,502.40 per year. Furthermore, the full basic state pension will increase to £169.50 per week, equivalent to £8,814 per year. These adjustments aim to provide greater financial security and support for retirees throughout the UK.
In addition to the state pension enhancements, the Autumn Statement 2023 introduces pivotal reforms to pensions. As of April 2023, the lifetime pension allowance charge has been removed, and from April 2024, the allowance will be abolished entirely. This change aims to simplify the system and encourage individuals to save for their retirement. Moreover, the pension annual allowance has increased to £60,000 from April 2023, while the money purchase annual allowance has risen to £10,000 for those already drawing a pension. It is important to note that while these reforms are hailed as simplification measures, the opposition party, Labour, may restore the allowance if they form the next government.
Addressing Small Pot Pensions and Enhancing Control
The government recognizes the longstanding issue of “small pot” pensions and aims to address it. A call for evidence will be launched on a lifetime provider model, which aims to grant individuals greater control over their pension contributions when changing employment. This model seeks to streamline the process and empower individuals to manage their pensions effectively. However, it is crucial to consider that these changes may pose challenges for small businesses.
Extension of EIS and VCT
The Autumn Statement 2023 also outlines the government’s intention to extend the existing sunset clauses for the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) from 6 April 2025 to 6 April 2035. This extension aims to provide continued support and incentives for investments in innovative businesses through the EIS and VCT.
Geographical Scope of Agricultural Property Relief and Woodlands Relief
Previously announced in the Spring Budget, changes are being implemented to limit the scope of agricultural property relief and woodlands relief to property in the UK. This means that property located in the European Economic Area (EEA), the Channel Islands, and the Isle of Man will be treated similarly to property located outside the UK. These changes will take effect from 6 April 2024, ensuring a more consistent application of inheritance tax relief.
Help with Childcare: Expanding Support
To assist working parents with childcare costs, a phased package of support has been introduced. Starting from April 2024, working parents of two-year-olds will have access to 15 hours of free childcare. From September 2024, this will be extended to children as young as nine months for working parents. Finally, from September 2025, working parents of children aged nine months and older will be entitled to 30 hours of free childcare per week until their child starts school. These expanded offerings aim to provide parents with more flexibility and financial relief when it comes to childcare expenses.
Making Tax Digital: Simplifying Income Tax Self-Assessment
The Chancellor has announced changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). These changes include keeping the current MTD threshold at £30,000 and implementing design improvements to enhance the system. These changes will come into effect from April 2026. Furthermore, the government plans to legislate in the Autumn Finance Bill 2023 to ensure taxpayers who join MTD from 6 April 2024 are subject to a fairer penalty regime for late filing and payment of taxes.
Streamlining Self-Assessment Tax Return Requirements
Starting from the 2024-25 tax year, individuals with income solely taxed through PAYE will no longer be required to file a Self-Assessment tax return. This change aims to simplify the tax process for individuals and reduce unnecessary administrative burden.
Additional Resources for HMRC
To enhance HMRC’s ability to manage tax debts, the government plans to invest an additional £163 million. This investment will enable better differentiation between those who can settle their tax debts but choose not to and those who temporarily need support. HMRC will expand its debt management capacity, aiming to help both individual and business taxpayers become debt-free faster and collect outstanding debts efficiently. It is crucial to note that no additional funding for HMRC to improve current service levels was announced in the Autumn Statement 2023.
Stay Informed with Studholme-Bell
The Autumn Statement 2023 brings significant pension and tax reforms, shaping the financial landscape for individuals and businesses alike. Stay up to date with the latest developments and expert insights with our comprehensive guide on the 2023 Autumn Statement. Our team of professionals is committed to providing valuable information and guidance to help you navigate the ever-changing financial landscape.
