Personal & employment taxes
As predicted, the Chancellor announced some cuts in relation to the taxes facing individuals:
- National Insurance
Class 1 employees’ National Insurance contributions (NICs) to be cut by 2% from 6 January 2024 (down to 10%), meaning those on a salary of £35k would save £450. There has been no reduction of Employer’s National Insurance announced.
For self-employed people earning more than £12,570, Class 2 National Insurance will be abolished. Voluntary Class 2 National Insurance can be made by those earning less. Those who pay Class 4 between earnings of £12,570 and £50,270 will see a cut to 8% from next April.
The relief for employers of eligible veterans has been extended for a further year, meaning businesses pay no employer NICs on annual earnings up to £50,270 for the first year of a qualifying veteran’s employment in a civilian role.
- IR35 offset facility
From 6 April 2024, where a failure to deduct PAYE tax and National Insurance is assessed, HMRC will be able to set off employer PAYE liability against taxes paid by a worker and their intermediary.
In a bid to boost business investment, the Chancellor announced the following:
- Simplified research & development (R&D) tax relief
It was confirmed that the small and medium-sized (SME) and R&D expenditure credit (RDEC) schemes would be combined at the current 20% rate, but the notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than 25%. The Government are still seeking clarity on issues related to sub-contracted costs, however, the threshold for loss making, research intensive companies has been reduced to 30% from the previously announced 40%. While not as generous as the previous SME scheme, these new announcements still provide significant tax incentives for innovation.
- Creative Industries
From 1 January 2024, confirmation that Film, TV and video games tax reliefs will be reformed as refundable expenditure credits at an eligible rate of 39%.
- Capital allowances: Full expensing regime
The full expensing relief, which offers the ability to accelerate tax savings on new qualifying plant & machinery (P&M) expenditure helping cashflow and encouraging UK investment, has been made permanent. Previously, it was scheduled to be in place until 31 March 2026. It offers the availability to claim a 100% first year allowance on main rate expenditure and a 50% first year allowance for special rate expenditure. The Government will launch a technical consultation on wider changes to further simplify the UK’s capital allowances legislation.
The UK’s freeports offer a number of tax reliefs, including the suspension of duty and VAT on goods that are moved into one, additional National Insurance reliefs and enhanced structures and buildings allowances. The reliefs available are to be extended by another five years and there’s also to be more investment in them.
- Multinational top-up tax
There are a host of minor changes to the multinational top-up tax which introduces a global effective tax rate floor of 15% in anticipation of the rules coming into force from next year. These are unlikely to affect all but the largest groups of companies with more than Euro 750m turnover.
- National Minimum wage
From 6 April 2024 the National Living Wage for those aged 21 and over will increase by the biggest ever amount to £11.44 per hour. This represents a rise of £1,800 for full-time workers. Currently, those aged 23 and over get a rate of £10.42 per hour, while 21 and 22 year olds get £10.18.
- Construction Industry Scheme (CIS)
The Chancellor announced VAT tests would be added to the Gross Payment Status process. The statement papers also confirm the removal of the majority of landlord to tenant payments for the scope of the CIS digitising applications for CIS registration bringing forward the first review of gross payment status holder’s compliance history from 12 months after application to 6 months, reverting to 12 months thereafter.
- Business rates in England
The 75% business rates relief for hospitality, retail and leisure businesses will be extended for a further year. The small business rates multiplier to be frozen at 49.9p for smaller properties and 51.2p for larger properties for a further year also.
- Mansion House (pension) Reforms
Back in July, the Chancellor announced that there will be pension incentives released in order to unlock capital for high-growth companies. Yesterday (21 November), it was published that £320 million would be made available in the first tranche of investment from these Reforms. This investment fund – which focuses on the UK’s innovative companies – will provide an extra £1,000 a year for the average earner that starts saving from 18. Further information is available here.
- Alcohol duty frozen, tobacco duty up
While confirming the Brexit Pub Guarantee, where duty on a pint will be lower in pubs than in shops, it was announced that all alcohol duty will be frozen until 1 August 2023. This means no increase in duty on beer, cider, wine or spirits. On the other hand, duty on hand-rolled tobacco has been increased by 10% above the ‘escalator
The commitment to the triple lock has been honoured in full. As such, from April 2024, the Government will increase the full new state pension to £221.20 a week (a rise of 8.5%).A call for evidence has been launched on a lifetime provider model to make it a legal right to require new employers to pay into existing pension pots if the employee chooses, making it easier to for individuals to have one pension pot for life.
- Skills investment
£50m investment over next two years for engineering and other key growth sector apprentices
- Installation of energy-saving materials
The VAT relief available on the installation of energy-saving materials in residential buildings or those used solely for a relevant charitable purpose will be expanded from February 2024.
- Funding for artificial intelligence (AI)
As a means of making the UK “an AI powerhouse”, over £500m will be invested over the next two years for funding “innovation centres”.
- HMRC Resource Issues
HMRC’s debt management resource is to be increased to support individuals and businesses who are unable to pay their tax debts.
- Investment zones
Three further investment zones have been announced in England, with 65,000 jobs expected to be created with a focus on advanced manufacturing zones. Their locations have been confirmed to be in the West Midlands, East Midlands, and Greater Manchester.
There has also been a second investment zone announced for Wales, in Wrexham and Flintshire.