Autumn Statement 2023: Summary of key announcements

Overview

The Chancellor of the Exchequer, Jeremy Hunt, delivered the autumn statement on 22nd November, this paper provides a summary of the key announcements.

Overall, the Statement put a key focus on targeted tax cuts and incentives aiming to reduce the overall debt burden and grow the economy. It opened with highlighting the more than halving of CPI since Autumn 2023– delivering on a target set in January 2023, the pandemic economic recovery is greater than expected, and underlying debt as a proportion of GDP is forecast to fall, the announcements below followed:

OBI Fiscal and Economic Outlook

• The OBR forecasts inflation to continue to fall further to 2.8% in Q4 2024, then average 1.8% over 2025 before returning to the 2% target in the medium term.

• The economy is expected to grow by 0.6% in 2023 and 0.7% in 2024. Growth is then forecast to increase to 1.4% in 2025 and an average of 1.9% between 2026 and 2028 as inflation falls.

• Unemployment is expected to rise to 4.6% in the middle of 2025, as slower GDP growth and higher interest rates weigh on labour demand, falling back to its structural rate of 4.1% at the end of the forecast horizon.

Cutting Taxes and Rewarding Hard Work

Changes to the National Insurance Contributions

• The main rate of Class 1 employee National Insurance contributions (NICs) will be cut from 12% to 10% from 6th January 2024.

• Self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits, including the State Pension.

• The main rate of Class 4 self-employed NICs will also be reduced from 9% to 8%.

Changes to the National Living Wage

• From 1 April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44 an hour with the age threshold lowered from 23 to 21 years old, ending hourly low pay.

Personal Savings & Investments

Changes to Investment Saving Accounts (ISA)

The government will allow the following as of April 2024:

• Multiple subscriptions to ISAs of the same type every year.

• Partial transfers of ISA funds in-year between providers

• The requirement to reapply for an existing dormant ISA will be removed.

• Long-Term Asset Funds and open-ended property funds with extended notice periods will be permitted investments.

• Certain fractional shares contracts will be permitted as eligible ISA investments and will engage with stakeholders on implementation.

Lifetime Allowance Abolishment

• Taking effect from 6 April 2024, the Lifetime Allowance will be removed. This will clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.

Off-Payroll Working (IR35)

• HMRC will be allowed to reduce the Pay As You Earn (PAYE) liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off- payroll working rules.

Making Tax Digital for Income Tax Self-Assessment

• From April 2026 the current Making Tax Digital (MTD) threshold for Income Tax Self-Assessment (ITSA) on small businesses will be maintained at £30,000 and changes will be designed to simplify and improve the system.

• Taxpayers, who join MTD from 6 April 2024, would be subject to the government’s new, fairer penalty regime for the late filing of tax returns and late payment of tax.

Business Taxation

Capital Allowances – Full Expensing

• Companies across the UK will be able to write off (“fully expense”) the full cost of qualifying main rate plant and machinery investment in the year of investment, including 50% first-year allowance for special rate assets, with aim of supporting businesses to invest and grow.

• A technical consultation will be launched on wider changes to simplify the UK’s capital allowances legislation and explore the case for expanding the scope of full expensing to include assets for leasing.

Business Rates

• The government has frozen the small business multiplier for another year, while the 75% Retail, Hospitality and Leisure (RHL) relief will be extended for 2024-25. The standard multiplier will be uprated in line with September’s CPI. These changes will take effect from 1 April 2024 in England.

Stamp Duty and Stamp Duty Reserve Tax

• The Growth Market Exemption, a relief from Stamp Duty (SD) and Stamp Duty Reserve Tax (SDRT), will be extended to include smaller, innovative growth markets. It will also increase the threshold for the market capitalisation condition that is used within the exemption from £170 million to £450 million. These changes will be included in the Autumn Finance Bill 2023 for implementation from 1 January 2024.

R&D Tax reliefs

• The current R&D Expenditure Credit (RDEC) and SME schemes will be merged from April 2024 onwards, simplifying the system and providing greater support for UK companies to drive innovation. The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%.

• The intensity threshold in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%.

• From 1 April 2024, R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions.

Pillar Two

• The Undertaxed Profits Rule will be introduced, which forms part of the G20-OECD global minimum tax framework, in the UK for accounting periods beginning on or after 31 December 2024. Technical amendments will be also made to the Multinational Top-up Tax and Domestic Top-up Tax legislation through the Autumn Finance Bill 2023.

• The Offshore Receipts in respect of Intangible Property (ORIP) rules in respect of income arising from 31 December 2024 will be abolished.

Boosting Growth and Investment

Foreign Direct Investment

• A new Ministerial Investment Group will be established to review investment grant processes, and increase resourcing for the Office for Investment, strengthening the UK’s world-class concierge service for investors.

Investment Zones

• The Investment Zones programme will be extended from five to ten years, which will double the envelope of funding and tax reliefs available in each Investment Zone from £80 million to £160 million. The duration of the tax reliefs available in Freeports will also be extended from five to ten years to maximise the programme’s impact. A new £150 million Investment Opportunity Fund will be created, which will be available over five years.

Real Estate Investment Trusts (REITs)

• Further to the publication of draft legislation on 18 July 2023, the government will make amendments to the rules for Real Estate Investment Trusts (REITs) to enhance the competitiveness of the regime and boost the investment into the sector.

Climate Change Agreement scheme

• The government is providing around £300 million a year in tax relief in exchange for meeting energy efficiency targets under the new six-year Climate Change Agreement scheme which starts from 2025. Participants that meet agreed energy efficiency or decarbonisation targets between 2025 and 2030 will be entitled to reduced rates of Climate Change Levy from 1 July 2027 to 31 March 2033.

Pension Funds

Pension Reforms

• A comprehensive package of pension reform has been introduced that will provide better outcomes for savers, drive a more consolidated pensions market, and enable pension funds to invest in a diverse portfolio. These measures represent the next steps of the Chancellor’s Mansion House reforms.

Public consolidator for Defined Benefit (DB) pension schemes

• Government will consult this winter on options for DB schemes, currently unserved by the market, to consolidate into a new statutory vehicle run by the Pension Protection Fund. The aim is to increase opportunities for defined benefit schemes to invest in productive finance while fully protecting member benefits.

• The authorised surplus repayment charge will also be reduced from 35% to 25% from 6 April 2024.

Defined Contribution (DC) schemes

• A call for evidence on a lifetime provider model is being launched to simplify the pensions market by allowing individuals to move towards having one pension pot for life, and on a potential expanded role for collective defined contribution (CDC) schemes in future.

• The multiple default consolidator model will also be introduced to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000.

Local Government Pension Scheme

• The Local Government Pension Scheme (LGPS) guidance will be revised to implement a 10% allocation ambition for investments in private equity as well as a March 2025 deadline for the accelerated consolidation of LGPS assets into pools and setting a direction towards fewer pools exceeding £50bn of assets under management.

Long-term Investment for Technology and Science (LIFTS)

• To support pension scheme investment into the UK’s most innovative companies, the government will commit £250 million to two successful bidders in the Long-term Investment for Technology and Science (LIFTS) initiative, subject to final agreement.

References: HM Treasury: Autumn Statement 2023