On November 22, 2023, UK Chancellor of the Exchequer, Mr. Jeremy Hunt, presented the Autumn Statement before the UK Parliament. The proposals put forth in the statement aim to promote economic stability and fiscal sustainability. The government is focusing on five key areas to achieve these goals: reducing debt, cutting taxes, and rewarding hard work, supporting British businesses, developing domestic and sustainable energy sources, and delivering a world-class education system.
The following are the highlights of the proposals presented in the Autumn Statement.
Measures relevant for employers/individuals:
- National Insurance Contributions (NICs):
- From January 6, 2024, the Employee’s Class 1 NIC main rate will be reduced from 12% to 10%. No reduction is proposed in employer’s NI contribution. The following table summarizes the changes:
| Timeline | Rates for Employer | Main rates for Employee (below Upper Earnings Limit) | Additional rate for Employee (above Upper Earnings Limit) |
| Prior to January 6, 2024 | 13.80% | 12% | 2% |
| Effective from January 6, 2024 | 13.80% | 10% | 2% |
Various ceilings and limits for applicability of NIC remain unchanged.
- Self-employed individuals are required to pay Class 2 and Class 4 NIC. In order to simplify the NIC system for self-employed individuals, starting from April 6, 2024, Class 2 NIC will be abolished. However, Individuals with profits falling between GBP 6,725 and GBP 12,570 will still have access to contributory benefits including the State Pension. The Class 4 NIC rate for the self-employed will also be reduced from 9% to 8%.
- Relief available to employers of eligible veterans regarding NICs contribution will be extended for one year, covering the 2024-25 tax year. This relief means that businesses will not have to pay employer NICs on annual earnings up to GBP 50,270 for the first year of a qualifying veteran’s employed in a civilian role. Veterans are individuals who were employed in armed forces and have taken civil career.
- National Minimum Wage (NMW)/National Living Wage (NLW): Effective from April 1, 2024, the NMW/NLW rates will increase. Individuals aged 21 and above will receive GBP 11.44 per hour.
- Self-Assessment and PAYE: Starting from 2024-25, individuals with income taxed only through the PAYE system will not be required to file a self-assessment return. There are certain exceptions to this treatment.
- Data collection via Real Time Information (RTI): Legislation will be introduced in the Autumn Finance Bill 2023 to require employers, company directors, and self-employed individuals to provide new or improved data to the UK tax authority HMRC. From an employer’s perspective, this requires providing more detailed information on employee hours paid via RTI reporting. These changes will come into effect from April 2025.
- Off-Payroll Working Rules: These rules, also known as IR-35 rules aim to ensure that contractor pays the same amount of income tax and NIC as employee if they meet certain conditions. Effective April 6, 2024, the changes will be legislated whereby HMRC will be able to offset deemed employer’s PAYE liability against taxes already paid by a worker (contractor) and their intermediary where an error has been made in applying off-payroll working rules and the contractor is deemed to be an employee under these rules.
- Pensions: Workers will now have the right to nominate the pension pot to which their employer contributes, known as a “pot for life.” A call for evidence will be conducted to explore these proposals in more detail. Additionally, legislation will be introduced in Autumn Finance Bill 2023 to abolish the Lifetime Allowance, effective from April 6, 2024. It is the total amount one can accumulate as pension savings without incurring a tax liability and any benefit beyond it was subject to tax charge. The lifetime allowance tax charge was earlier removed in April 2023 and new system is likely to be introduced.
- State Pension: The UK government has announced an 8.5% increase in the state pension, effective from April 6, 2024. This increase will bring the new full state pension to GBP 221.20 per week.
Measures relevant for business:
- Capital Allowances: The UK government has confirmed that full expensing will be made permanent. Thus, businesses can claim upfront relief for the full cost of qualifying new plant and machinery (other than cars or assets acquired for leasing). Additionally, the 50% first-year allowance will continue to be available for special rate plan and machinery. The existing rules were applicable until April 1, 2026, but this end date will be removed by Autumn Finance Bill 2023.
- Research & Development (R&D) Tax Relief:
- The Small and Medium-sized Enterprises (SMEs) scheme and Research and Development Expenditure Credit (RDEC) schemes will be merged into a single simplified scheme from April 1, 2024. This will provide an above-the-line (before tax credit) expenditure credit at a rate of 20%. The notional tax rate applied to loss making taxpayers will be lowered from 25% (as per REDC scheme) to the small profits rate of 19%.
- To further support loss making SMEs which are heavily invested in R&D, the UK government has announced a reduction in the intensity threshold for additional support. Effective from April 1, 2024, the intensity threshold will be lowered from 40% to 30%, making it easier for more SMEs to qualify for enhanced support. The government will also introduce a one-year grace period, so that companies that dip under the 30% qualifying R&D expenditure threshold will continue to receive relief for one year.
- Adoption of OECD/G20 Global Minimum Tax Regime (BEPS Pillar 2): The UK will implement Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT), effective from accounting periods beginning on or after December 31, 2023, to ensure multinational enterprises are subject to a minimum 15% effective tax rate. Technical amendments reflecting recent guidance will be included in the Autumn Finance Bill 2023. Further, the government will introduce the Undertaxed Profits Rule for accounting periods beginning on or after 31 December 2024, with legislation included in an upcoming Finance Bill. This initiative aims to ensure that companies pay their fair share of tax and to prevent tax avoidance.
- Investment Zones: Legislation will be introduced to extend incentives and tax reliefs for investment zones and freeports from 5 to 10 years. Details of confirmed investment zones will be announced, with the aim to confirm all zones by summer 2024.
- Business Rates: The small business multiplier will be frozen, and the 75% discount on rates for the retail, hospitality, and leisure industry (up to a GBP 110,000 discount) will be extended for another year. Changes will take effect from April 1, 2024 in England.
- Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT): Both schemes will be extended to 2035. These initiatives aim to encourage investment in small and growing businesses.
- Extending Freeports: The UK government has announced that it will extend the tax reliefs available to businesses operating in freeports by another five years. This means that businesses will continue to benefit from the suspension of duty and VAT on goods that are moved into freeports, as well as additional reliefs such as certain building and structure allowances, employer NIC relief, etc.
Implications
Employers should take note of revision in NIC rates and minimum wages and adjust their payroll procedure accordingly. Additionally, businesses should proactively assess their capital expenditure plans to take advantage of permanent full expensing benefits. Companies eligible for R&D benefit should assess the impact of changes in the R&D incentive regime on their profitability.
©Shan & Co. 2023