The government made some important tax announcements in the Autumn Statement, which some would consider brave given the uncertain outlook and reflect the likelihood of an election looming.  Whether these are enough to win back voters or stimulate growth remain to be seen.

Business Tax

Full Expensing

  • Full expensing, which allows companies to claim tax relief for 100% of qualifying capital expenditure in the year in which it is incurred, will be made permanent. This is a significant change that will make it more attractive for businesses to invest in new plant and machinery.

Research and Development (R&D) Reliefs

  • There will be further reforms to R&D reliefs, which will come into effect in April 2024. The current two schemes will be merged into one, and there will be additional relief available to loss-making R&D-intensive small and medium-sized enterprises (SMEs).

Business Rates

  • Business rates relief at 75% for retail, hospitality and leisure businesses in England will continue for another year, until 31 March 2025. This is a welcome announcement for businesses in these sectors, which have been hit hard by the pandemic.
  • The business rates multipliers (used to calculate business rates) will be frozen at their current levels until 31 March 2025. This will help to protect businesses from rising business rates bills.

National Insurance Contributions (NICs)

Class 4 NICs

  • From 6 April 2024, Class 4 NIC on business profits between £12,570 and £50,270 will be reduced from 9% to 8%. This is a small but welcome cut in taxes for businesses.

Class 2 NICs

  • Compulsory Class 2 NIC (currently a flat rate of £3.45 per week) will be abolished from 6 April 2024. This will simplify the National Insurance Contribution's (NICs) system for businesses and save them money.

Cash Basis

The cash basis regime is to be extended as follows:

  • Removal of the turnover thresholds for businesses. This means that more businesses will be able to use the cash basis regime, which simplifies accounting and tax compliance.
  • Setting the cash basis as the default method of calculating taxable profits, with an opt-out for accruals. This will make the cash basis regime more accessible for businesses.
  • Removal of the £500 limit on interest deductions. This will make it easier for businesses to claim tax relief for interest payments.
  • Removal of the restrictions on using loss relief. This will make it easier for businesses to offset losses against profits in other years.

Other

  • The Van benefit charge and the car and van fuel benefit charges will remain the same for 2024-25. This will provide some stability for businesses that use vans.
  • There is a promise of further guidance on the deductibility of training costs incurred by businesses. This is welcome news for businesses that invest in training their employees.
  • There will be a consultation on the VAT treatment of private hire vehicle operators. This consultation will consider whether to change the VAT treatment of private hire vehicle operators, such as Uber and Lyft drivers.

Additional Points

  • There are also some specific measures for companies operating in the oil and gas industries. These measures include changes to the petroleum revenue tax (PRT) and the supplementary charge on oil and gas production.
  • There are changes to the electric generator levy and the energy profits levy. These changes are designed to raise revenue from energy companies, which have benefited from the high prices of energy.
  • The term of investment zones and freeports is to be extended from five to ten years. This will give businesses more time to take advantage of the tax benefits that are available in these areas.
  • Four new investment zones are being created. These investment zones are located in Teesside, West Midlands, Humber Coast, and South East Wales.
For Individuals: 

National Insurance Contributions (NICs)

The Chancellor announced a significant reduction in the main rate of employee Class 1 NICs, from 12% to 10%, effective from 1 January 2024. This reduction will apply to earnings between £12,571 and £50,270. The employer rate of NICs will remain unchanged.

Key Points:

  • The main rate of employee Class 1 NICs reduced from 12% to 10% (effective 1 January 2024)
  • No change to the employer rate of NICs

Individual Savings Accounts (ISAs)

The Government has outlined a series of changes to ISAs aimed at simplifying and expanding the scope of eligible investments. From 6 April 2024, ISAs will be moved onto a digital system, making them more accessible and efficient.

Key Points:

  • ISAs to be simplified and expanded to include a wider range of investments
  • ISAs to be moved onto a digital system for enhanced accessibility

Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs)

The Chancellor has extended the availability of EIS and VCT schemes to 2035, ensuring ongoing support for growth capital and early-stage innovative companies. These schemes provide tax incentives for individuals who invest in eligible startups.

Key Points:

  • EIS and VCT schemes extended to 2035 to support growth capital and early-stage companies
  • Tax incentives for individuals investing in EIS and VCT schemes

IR35

Legislation coming into effect from 6 April 2024 aims to address potential over-collection of tax and NICs arising from non-compliance with IR35 rules. These rules govern the employment status of individuals working through intermediaries.

Key Points:

  • Legislation to address over-collection of tax and NICs under IR35 rules
  • Focus on ensuring compliance with IR35 to protect both employers and contractors

Pensions

The Chancellor announced significant changes to pensions, including facilitating the consolidation of both pension funds and pension pots. This move aims to enhance flexibility and simplify pension management for individuals.

Key Points:

  • Facilitation of pension fund and pension pot consolidation
  • Increased flexibility and simplified pension management for individuals

These tax changes reflect the Government's ongoing efforts to support individuals and businesses, particularly in the context of economic recovery and growth.

Making Tax Digital (MTD) Simplification: Streamlining the Tax Filing Landscape

The Autumn Statement 2023 marked a significant step forward in the ongoing efforts to simplify the tax system for individuals and businesses. Among the key announcements was a comprehensive review of Making Tax Digital (MTD), a transformative initiative aimed at modernizing tax administration and enhancing compliance.

Streamlined Quarterly Updates

Acknowledging the potential burden of quarterly updates, the government has taken steps to streamline the process for all taxpayers. Instead of submitting separate updates for each quarter, taxpayers will now be required to provide cumulative totals for the tax year to date. This simplification will alleviate the administrative burden while maintaining essential tax transparency.

Simplified Process for Complex Affairs

Taxpayers with more complex affairs, such as landlords with jointly owned property, have historically faced challenges in complying with MTD requirements. Recognizing these complexities, the government has implemented measures to streamline the process for these individuals. For instance, landlords will be able to share digital records with their co-owners, reducing the administrative overhead.

Elimination of End-of-Period Statements

To further reduce administrative burdens, the requirement to submit end-of-period statements has been removed. This change will simplify the overall MTD process and free up taxpayers' time to focus on core business activities.

Exemptions for Specific Taxpayers

Recognizing the unique circumstances of certain taxpayers, the government has introduced exemptions from MTD requirements. Individuals without a National Insurance number, for example, will now be exempt from the scheme. This exemption demonstrates the government's commitment to tailored solutions that address the needs of diverse taxpayer profiles.

Expanded Agent Representation

Taxpayers using MTD can now be represented by more than one tax agent, granting them greater flexibility in managing their tax affairs. This change aligns with the government's goal of empowering taxpayers to choose the representation structure that best suits their needs.

Mandating MTD for Businesses and Landlords with Income below £30,000 Under Review

The government has acknowledged the concerns raised regarding the potential impact of further mandating MTD for businesses and landlords with income below £30,000. Recognizing the need for further assessment, the government has committed to keeping the plan under review. This decision demonstrates a willingness to adapt MTD implementation based on feedback and data analysis.

Fourfold Simplification Objectives

To guide future simplification efforts, the government has set out four key objectives:

  1. Clarity and Consistency: Tax rules should have a clear and consistent rationale, making them easier to understand and apply.
  2. Proportionate Burden: The administrative burden on taxpayers and HMRC should be proportionate and manageable, ensuring a fair and efficient tax system.
  3. Understanding Obligations: Taxpayers should have clear and accessible information about their obligations and options, particularly at crucial lifecycle stages.
  4. Informed Decisions: Tax policy should not unduly influence taxpayer decisions, allowing them to make informed choices based on their specific circumstances.

These simplification objectives provide a framework for continuously enhancing the tax system's user-friendliness and accessibility.

Conclusion

The Autumn Statement's MTD simplification measures represent a significant step towards a more user-centric tax system. By streamlining quarterly updates, simplifying the process for complex affairs, and expanding agent representation, the government has demonstrated its commitment to reducing administrative burdens. While further work is required to address the concerns surrounding mandatory MTD for businesses and landlords with income below £30,000, the overall simplification efforts are commendable and set a positive precedent for future tax reforms.

Management of taxes
  • Simplifying Tax Returns for High-Income Individuals: Starting from 2024-25, individuals with an annual income exceeding £150,000 and who are taxed through PAYE (Pay as You Earn) will no longer be required to submit a self-assessment tax return, unless they have another reason to do so. This simplification measure aims to reduce the administrative burden for high-income earners who are already subject to PAYE deductions.
  • Strengthening Enforcement Against Tax Avoidance: The government is bolstering its arsenal to combat tax avoidance schemes by introducing two new measures:
    1. Criminal Offence for Non-Compliance with Stop Notices: A new criminal offense will be created for individuals who fail to comply with a stop notice issued by HMRC (Her Majesty's Revenue and Customs). Stop notices are used to temporarily prevent individuals or businesses from disposing of assets or taking other actions that could hinder HMRC's investigations.
    2. Disqualification Orders for Directors: HMRC will gain the power to apply for disqualification orders against directors of companies involved in tax avoidance schemes. Disqualification orders can prohibit individuals from holding directorships for a specified period.
  • Increasing Penalties for Tax Fraud: The maximum prison sentence for tax fraud will be increased from seven to 14 years. This significant increase in the maximum penalty reflects the government's resolve to deter and punish those who engage in fraudulent tax practices.
Overall Implications

These measures represent a concerted effort by the government to simplify tax administration for high-income individuals while simultaneously strengthening enforcement against tax avoidance and fraud. The introduction of a new criminal offence, the power to seek disqualification orders, and the increased maximum penalty for tax fraud signal a strong commitment to protecting the integrity of the tax system.

 

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