On 22 November 2023, UK Chancellor Jeremy Hunt gave the latest Autumn Statement. For those not familiar with the Autumn Statement, it is basically a very lengthy speech providing critical updates on the state of the UK economy and sometimes includes very important tax announcements (which was most certainly the case this year!)
The UK has experienced quite a lot of change recently ranging from Brexit and Liz Truss’ mere six weeks in office as prime minister. In today’s newsletter we’re summarising the most critical takeaways from the Autumn Statement:
Economic Update:
Before diving straight into taxes (our favourite), we highlight some of the key economic points raised in the latest Autumn Statement:
- The UK economy is now predicted to be 1.8% larger than pre-Covid levels;
- Inflation is predicted to decline to 2.8% by the end of 2024;
- The UK still holds the lowest corporate tax in the G7 (the G7 is a political and economic forum which consist of the UK, the US, Germany, France, Canada, Italy and Japan); and
- The Chancellor is aiming to grow the economy (including business investment and overall productivity) by £20 billion annually.
Corporate Taxes:
- Capital allowances for purchasing new plant and machinery
Previously when you purchased new land and/or machinery and incurred qualifying expenditure in doing so, you were entitled to claim a special capital allowance (essentially resulting in a full write-off of the expense). In the Spring Budget of 2023 this capital allowance was capped for only the period between 1 April 2023 – 1 April 2026. However, in the Autumn Speech, it was declared that this capital allowance would now be permanent.
- Pillar Two
Ah the infamous Pillar Two. Placing all the technical jargon aside, in a nutshell, Pillar Two aims to ensure that multinational enterprises (who exceed the £750 million threshold) will be subject to an effective minimum tax rate of 15% in every jurisdiction in which they operate. The UK is aiming to implement this by the introduction of the Undertaxed Profits Rule in the UK which will take effect from 31 December 2024, and will essentially impose a top-up tax on any subsidiaries’ profits subject to tax at less than 15%.
- Investment Zones
Before diving into the nitty gritty it is important to understand the purpose of an investment zone – basically it’s a certain geographical area that is intended to drive economic growth, and thus such zones offer various tax incentives including stamp duty relief and enhanced allowances and contributions.
In the Autumn Statement, Chancellor Jeremy Hunt announced that this programme will be extended in England from five to ten years (so great news for economic development overall). In addition three new zones were announced which consists of the East Midlands, the West Midlands and Greater Manchester.
- The Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)
Both these reliefs were on track to come to an end as of 5 April 2025. However, both the EIS and VCT have now been extended to 6 April 2035 (quite the extension!). This means that investors who purchase new shares issued by qualifying EIS and VCTs, can still qualify for income and capital gains tax relief.
Indirect Taxes:
Indirect taxes are often placed on the backfoot. However, indirect taxes can (and does) have a major impact on businesses and individuals. Below we highlight some important mentions:
- VAT on women’s sanitary products
There has recently been quite the global movement towards using reusable period underwear for environmental reasons. In the Autumn Statement it was announced that this type of underwear will now also be zero-rated for VAT purposes.
- Alcohol/tobacco
Could be quite the important announcement for those of us who enjoy a very festive, festive season. Alcohol duties will be kept on halt until 1 August 2024 in order to allow businesses to become familiar with the new alcohol duty system.
Further, duty on tobacco products will be increased by RPI+2% (hand-rolling tobacco will increase by RPI+12%). Importantly, these changes have already been in effect since 6pm on 22 November 2023.
- Gambling
We all know we can practically do everything from our phones these days, including gambling. In the Autumn Statement it was announced that remote gambling (i.e. from a device, the internet, TV or radio) will now be taxed as a single tax instead of three separate taxes (remote gaming duty, pool betting duty and general betting duty).
Personal Taxes:
- The National Living Wage
If an individual qualifies as an eligible worker over the age of 21, the National Living Wage will increase by 9.8% per hour from 1 April 2024.
- Pay As You Earn (PAYE)
If an individual receives income that is taxed only with PAYE, the individual will no longer be required to file a Self-Assessment return from 2024-2025.
- Pensions
Simply put the pension system in the UK will be undergoing a massive change on various fronts. On a technical front the authorised surplus repayment charge will be reduced from 35% to 25% as from 6 April 2024. Further, the Pensions Lifetime Allowance will be abolished from 6 April 2024.
- National Insurance Contributions
The national insurance contributions rates for both employees and self-employed individuals will be reduced. However, no changes to income tax rates and thresholds were announced in the Autumn Statement.
All-important tax announcements:
- Tax Avoidance
It will now be regarded as a criminal offense if you are regarded as a promoter of tax avoidance and promote tax avoidance schemes after receiving a Stop Notice asking you to stop what you’re doing.
- Directors
His Majesty’s Revenue and Customs will now have to power to remove a director from a company that is involved in tax avoidance (including a director who has control or exercise influence over a company.)
- Tax Fraud
The tax fraud imprisonment sentence will now be doubled from seven to 14 years.
Key Takeaway
On face value it seems the Autumn Statement was quite positive with the Chancellor predicting good economic growth for the UK alongside various, mainly favourable, tax changes. If you are an entrepreneur working in the UK or do any business in the UK, we strongly advise you to take note of the changes mentioned in the Autumn Statement.
If you have any questions or concerns on any UK tax-related matter, feel free to contact us today, to see how we can help you navigate the ever-complex modern tax world.
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