What were the Significant points made by the Chancellor in the Autumn statement on 22 November 2023:
Significant points
• Cuts to employee NICs take effect from 6 January 2024 and self-employed NICs from 6 April 2024
• 100% first year allowances (‘full expensing’) for companies made ‘permanent’ (originally due to expire 31 March 2026)
• Extension of the ‘cash basis’ of computing taxable profits for unincorporated businesses
• No changes announced to Income Tax, Inheritance Tax or Stamp Duty Land Tax – all remain fixed at levels previously announced
Personal Income Tax
Rates and allowances (Table A)
The tax thresholds and rates are frozen.
‘Freezing the thresholds’ avoided the appearance of a direct tax increase, but it is obvious that the effect of pay rises will bring many more people into the higher rate bands, increasing the average rate of tax that they will pay. It will also bring more very low earners into paying tax when their incomes rise above the personal allowance.
Dividend income
No changes were announced to the taxation of dividend income. This means that the dividend allowance, below which no tax is paid on dividends, will fall from £1,000 in 2023/24 to £500 in 2024/25. The reduction in this allowance (which was £2,000 for several years up to 2022/23) will require many more people to file self-assessment tax returns to settle what will often be a relatively small tax liability.
Employees
Company cars and fuel
Car benefits remain fixed at rates previously announced until the end of 2024/25. The figure used to calculate the benefit of free use of business fuel for private journeys is also fixed at the current figure of £27,800.
The taxable amounts for the availability of a van for more than incidental private use, and for an employee’s private use of fuel in a company van, normally increase in line with inflation. However, the 2023/24 flat rate figures of £3,960 and £757 for these benefits will remain the same for 2024/25.
National Living Wage (NLW)
From 1 April 2024, NLW will apply to those aged 21 or over (currently 23), and will rise from £10.42 per hour to £11.44, with comparable increases to the other rates that apply to younger workers and apprentices.
National Insurance Contributions (NIC)
Thresholds and rates (Table C)
The tax cut announced in the Autumn Statement is a cut in the rate of employee NICs on earnings between the lower and upper earnings limits from 12% to 10%. This will take effect on 6 January 2024, and will save up to £754 in a full tax year (for an employee earning £50,270 or above).
Self-employed people have for many years had to pay flat rate Class 2 NICs, which have conferred entitlement to State pension, and profit-related Class 4 NICs. These are both cut with effect from 6 April 2024:
• Class 2 NICs will not be required to secure benefits for anyone earning above £6,725, saving £179.40 a year – they can still be paid voluntarily for anyone earning less than that to maintain a full contribution record;
• The rate of Class 4 NICs on profits between £12,570 and £50,270 will be reduced from 9% to 8%, saving up to £377.
Capital Gains Tax (CGT)
Annual exemption
The annual exempt amount (AEA), which is currently £6,000 for 2023/24, will be reduced as previously announced to £3,000 for 2024/25.
As well as increasing the likelihood of tax to pay, this reduction in the AEA will mean that many more taxpayers will need to file the CGT pages of the self-assessment tax return. These pages need completing unless both:
•net gains do not exceed the AEA; and
•the total proceeds from all disposals do not exceed £50,000.
Inheritance Tax (IHT)
Thresholds and rates
The IHT nil rate band (NRB) has been frozen at £325,000 since 6 April 2009; the residence NRB has been £175,000 since 6 April 2020. It was announced a year ago that these figures would remain fixed until April 2028.
There have been no changes to the IHT rates, so the main rate remains 40% for transfers on death in excess of the NRBs.
Business Tax
Cash basis
For ten years, unincorporated businesses with a turnover of up to £150,000 have been able to use a simpler ‘cash basis’ to calculate their profits for tax purposes. If turnover grew to more than £300,000, the business would have to return to ‘accruals accounting’. The cash basis has a number of restrictive rules, including a maximum deduction of £500 for interest paid.
The Autumn Statement announced that the turnover limits will be removed for 2024/25: unincorporated businesses of any size will use the cash basis as the default method of computing their profits. Interest of any amount will be eligible for deduction, as long as it is wholly and exclusively incurred for the purposes of the business.
It will still be possible for a business to opt to use traditional accruals accounting rather than the cash basis, as is the case at present for rental income.
Capital allowances on plant and machinery
The Spring Budget included the introduction of ‘full expensing’ of capital expenditure by companies on new plant and machinery (P&M) for a three-year period from 1 April 2023 to 31 March 2026. The Chancellor has now made this ‘permanent’,
‘Special rate’ assets, which include integral features in buildings and long life assets, qualify for a 50% first year allowance (FYA). Cars, assets for leasing and second-hand assets are excluded from these FYAs – they only qualify for writing-down allowances.
New zero-emission cars qualify for a 100% FYA under a separate rule until 31 March 2025.
Construction Industry Scheme (CIS)
The CIS requires many businesses carrying out construction work to deduct tax (at either 20% or 30%) before paying subcontractors unless the supplier has gross payment status (GPS), which HMRC will grant to subcontractors who show a good record of tax compliance.
Corporation Tax (CT)
Rates
No changes were announced to CT rates, which remain 19% for companies with profits up to £50,000 and 25% for companies with profits over £250,000. Between £50,000 and £250,000 there is a tapering calculation that produces an effective marginal rate of 26.5% on profits within that band. The limits are divided between the number of associated companies (companies under the common control of one or more persons, including both individuals and companies).
Value Added Tax
Registration threshold
The level at which a business is required to register for VAT (taxable turnover of £85,000 in the last 12 months, or expected in the next 30 days) has been fixed since 1 April 2017, and no change was announced to the present intention to keep it at the same level until 31 March 2026. The effect of inflation will require many businesses that are trading below the threshold to register and account for VAT. The deregistration threshold is also fixed at its current level of £83,000 for the same period.
Energy saving materials
The installation of energy saving materials currently qualifies for zero-rating for VAT. This means that the installer can claim back the VAT on the cost of the goods installed, and charge no VAT to the customer. This relief is to be extended with effect from February 2024 to new technologies such as water-source heat pumps, and also to installations in buildings used solely for a relevant charitable purpose.
Stamp Duty Land Tax (SDLT)
Thresholds
On 23 September 2022, the government increased the nil rate threshold (NRT) for SDLT from £125,000 to £250,000 for all purchasers of residential property and from £300,000 to £425,000 for first-time buyers. The maximum purchase price for which the first-time buyer’s threshold applies was increased from £500,000 to £625,000.
These increases in thresholds were later classified as ‘temporary’ and will remain in place until 31 March 2025 ‘to support the housing market and the hundreds of thousands of jobs and businesses which rely on it.’ If history is a guide, such a pre-announced increase in SDLT may well lead to a boom in house prices just below the thresholds as the date approaches.
SDLT only applies in England and Northern Ireland. Decisions about the devolved taxes in Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax) will be taken by their respective governments.
Other measures
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA)
In December 2022, it was announced that the introduction of MTD ITSA for landlords and the self-employed would be staged. Those with incomes over £50,000 will come in first from April 2026, and those with between £30,000 and £50,000 will come in a year later in April 2027.
Requirement to file tax returns
At present, taxpayers with incomes over £150,000 are automatically required to file a self-assessment tax return each year. The Autumn Statement included an announcement that those whose tax is all paid under PAYE will be removed from this requirement from 2024/25.
Autumn Statement Tax Tables 2024/25
Income Tax Rates and Allowances (Table A)
Main allowances | 2024/25 | 2023/24 |
|---|---|---|
Personal Allowance (PA)*† | £12,570 | £12,570 |
Blind Person's Allowance Rent a room relief § Trading income § Property income § | 3,070 7,500 1,000 1,000 | 2,870 7,500 1,000 1,000 |
*PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £125,140 or more.
†£1,260 of the PA can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.
§ If gross income exceeds this, the limit may be deducted instead of actual expenses.
Rate Bands | 2024/25 | 2023/24 |
|---|---|---|
Basic Rate Band (BRB) | £37,700 | £37,700 |
Higher Rate Band (HRB) | 37,701-125,140 | 37,701-125,140 |
Additional rate | over 125,140 | over 125,140 |
Personal Savings Allowance (PSA) | ||
– Basic rate taxpayer | 1,000 | 1,000 |
– Higher rate taxpayer | 500 | 500 |
Dividend Allowance (DA) | 500 | 1,000 |
BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.
Rate Bands | 2024/25 | 2023/24 |
|---|
Rates differ for General, Savings and Dividend income within each band:
G | S | D | G | S | D | |
|---|---|---|---|---|---|---|
% | % | % | % | % | % | |
Basic | 20 | 20 | 8.75 | 20 | 20 | 8.75 |
Higher | 40 | 40 | 33.75 | 40 | 40 | 33.75 |
Additional | 45 | 45 | 39.35 | 45 | 45 | 39.35 |
General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.
The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.
Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £500 (2023/24 £1,000) of dividend income at nil, rather than the rate that would otherwise apply.
High Income Child Benefit Charge (HICBC)
1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.
Registered Pensions (Table B)
2024/25 | 2023/24 | |
|---|---|---|
Annual Allowance (AA) | £60,000 | £60,000 |
Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.
The AA is usually reduced by £1 for every £2 by which relevant income exceeds £260,000, down to a minimum AA of £10,000.
The AA can also be reduced by £10,000, where certain pension drawings have been made.
For 2023/24 and 2024/25, there is no Lifetime Allowance (LTA) charge on high pensions savings.
The maximum tax-free pension lump sum is £268,275 (25% of £1,073,100), unless a higher amount is “protected”.
Car and Fuel Benefits (Table C)
Cars
Taxable benefit: List price multiplied by chargeable percentage.
CO2 emissions: g/km | Electric range: Miles | All cars: % |
|---|---|---|
0 | N/A | 2 |
1-50 | >130 | 2 |
1-50 | 70 - 129 | 5 |
1-50 | 40 - 69 | 8 |
1-50 | 30 - 39 | 12 |
1-50 | <30 | 14 |
51-54 | N/A | 15 |
Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.
Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.
Car Fuel
Where employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from above table multiplied by £27,800.
National Insurance Contributions 2024/25 (Table D)
Class 1 (Employees) | Employee | Employer |
|---|---|---|
Main NIC rate | 10% | 13.8% |
No NIC on first | £242pw | £175pw |
Main rate charged up to * | £967pw | No limit |
2% rate on earnings above | £967pw | N/A |
Employment allowance per qualifying business | N/A | £5,000 |
*Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.
Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).
Class 2 (Self-employed)
From 6 April 2024, self-employed people with profits above £6,725 are no longer required to pay Class 2 NICs, but will continue to receive access to contributory benefits, including the State Pension.
Those with profits under £6,725 can pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension. The amount is £3.45 per week.
Class 3 (Voluntary)
Flat rate per week | £17.45 |
|---|
Class 4 (Self-employed)
On profits £12,570 - £50,270 | 8% |
|---|---|
On profits over £50,270 | 2% |
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