Key Points - A Summary
Business Tax
Corporation Tax Rates:
No change, the tax rates remain at 25% for companies with taxable profits over £250,000 and 19% for companies with taxable profits below £50,000, with a marginal rate between £50,001 and £250,000 in a 12 month period.
Capital Allowances AND ‘FULL EXPENSING’
At the Spring Budget 2023, the super deduction regime was replaced with ‘full expensing’ for 3 years from 1 April 2023 (allowing businesses to write off the full cost of qualifying plant and machinery investment against their taxable profits).
This change is now being made permanent with a 100% first year allowance for main rate assets and 50% first year allowance for special rate (including long life) assets.
This will mainly be of benefit to larger businesses as most small and medium sized businesses could already offset the full expense via Annual Investment Allowance (AIA) which is available on up to £1 million of qualifying plant and equipment purchases in a tax year.
Installing electric vehicle charge points (moved to here)
Businesses can potentially claim 100% of the costs of installing an electric vehicle charging point as a capital allowance. As previously announced, the government extended the 100% First Year Allowance for electric vehicle charge points to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes.
Research & Development (R&D)
As previously announced, for expenditure incurred on or after 1 April 2023, research and development (R&D) tax reliefs were changed as follows:
The small and medium-sized enterprises (SME) additional deduction decreased from 130% to 86%
The SME credit rate decreased from 14.5% to 10%
R&D expenditure credit rose from 13% to 20%
The R&D Intensive SME payable credit was introduced from April 2023 at the rate of 14.5%. A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure. These eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
The government announced that the intensity threshold in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%. A one-year grace period will be introduced so that companies that dip under the 30% qualifying R&D expenditure threshold will continue to receive relief for one year.
Businesses will be able to claim for expenditure incurred from 1 April 2023 once the Autumn Finance Bill 2023 has received Royal Assent, with the reduction in intensity threshold and grace period coming into effect for accounting periods beginning on or after 1 April 2024.
The existing Research and Development Expenditure (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 to be claimed in the merged scheme. The notional tax rate applied to loss-makers in the merged scheme will be lowered from 25% as per the current RDEC scheme, to 19%.
It should be noted that the reporting structure for claiming R&D tax relief were tightened from August 2023, with the requirement (from August 2023) to submit a detailed summary of the R&D projects and expenditure BEFORE filing the corporation tax return. For new claimants (or where a company hasn’t claimed in the previous three years) of R&D tax credit there is the requirement to notify HMRC of the intention to claim within 6 months of the end of the accounting period (generally – there are special rules for short and long accounting periods).
Investment Zones
The Investment Zones programme in England will be extended from 5 to 10 years, and three new zones were announced:
Greater Manchester
West Midlands
East Midlands
Business Rates
Small business rates (SBR) relief 75% discount will be extended for a year (2024-25) for the retail, hospitality and leisure sector. In addition, the SBR multiplier will also be frozen for a year.
Note that most micro/small business premises with a rateable value of up to £15,000 are eligible for Small Business Rate Relief (100% Small Business Rate Relief on business premises with a rateable value up to £12,000, then tapered to 0% between £12,001 and £15,000).
More details of the various Business Rates reliefs can be found here.
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)
The EIS and VCT reliefs were due to expire after 5 April 2025; new legislation will be introduced to extend the lifetime of these reliefs to 2035.
Annual Tax on Enveloped Dwellings (ATED)
This is a tax on companies that own UK residential property that is a ‘dwelling’ and valued at more than £500,000. ATED annual charges will be increased by 6.7% from 1 April 2024 in line with the September 2023 Consumer Price Index. For more details on ATED look here
Theatre tax relief
As previously announced in the Spring Budget, the Theatre Tax Relief, which was due to taper to 30% (for non-touring productions) and 35% (for touring productions) on 1 April 2023, was set to remain at 45% and 50% respectively until 31 March 2025. From 1 April 2025, the rates will be 30% and 35%, and rates will return to 20% and 25% on 1 April 2026. Charities that run a theatre as part of their core charitable purpose are generally not taxed on any surplus they make from operating the theatre’s core operations. The Theatre Tax Relief is in relation to commercially run theatres.
Personal Tax
Income Tax
As previously announced, personal tax thresholds have been frozen until April 2028 at the current levels. The additional rate threshold was reduced from £150,000 to £125,140 from 6 April 2023. The freezing of tax allowances is commonly known as a ‘stealth tax’ and (especially in periods of high inflation) results in a significant number of people becoming taxable or becoming taxable at higher rates.
National Minimum and Living Wage
From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over. Rates for those aged 20 and under also increased.
National Insurance Contributions (NICs)
Employees: The main rate of Class 1 employee NICs will be reduced from 12% to 10% from 6 January 2024. This will apply to earnings between £12,570 and £50,270 per annum.
Employers: there is no change to Employers National Insurance Contribution rates.
Self-employed: The rate of Class 4 NICs, paid by the self-employed on earnings between £12,570 and £50,270 will be reduced from 9% to 8% from 6 April 2024. In addition the Class 2 NICs, paid at a flat rate of £3.45 a week by the self-employed with profits above £12,570 will be abolished from 6 April 2024. However, access to contributory benefits, including the State Pension will be maintained. Those with profits between £6,725 and £12,570 will continue to access benefits above through a National Insurance credit without paying NICs as they do currently. It remains to be seen what happens with those with taxable profits less than £6,725 (including those trading at a loss); previously it was possible to optionally pay Class 2 NIC to obtain a State Pension contribution year. It is likely that going forward it will be necessary to pay Class 3 Voluntary Contributions that are at a much higher £17.45 a week rate, compared with Class 2 which was £3.45 a week. This area needs clarifying.
Pensions
The Government has announced a comprehensive package of pension reforms designed to provide better outcomes for savers, drive a more consolidated pensions market and enable pension funds to invest in a diverse portfolio.
The authorised surplus repayment charge will also be reduced from 35% to 25% from 6 April 2024.
Pension Triple Lock
The Government will maintain the “triple lock”. From April 2024, the full new state pension will increase by 8.5% to £11,500 per year, an increase of over £900.
Making Tax Digital (MTD)
The Chancellor announced a package of changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). This includes maintaining the current MTD threshold at £30,000 and design changes to simplify and improve the system. These changes will take effect from April 2026. The government is also legislating in the Autumn Finance Bill 2023 to ensure taxpayers, who join MTD from 6 April 2024, are subject to the government’s new, fairer penalty regime for the late filing of tax returns and late payment of tax.
This project has been beset with delays, having originally been scheduled for April 2023, then April 2024 and currently April 2026.
Reforming requirements to file a Self-Assessment tax return
The government will no longer require individuals with income taxed only through PAYE to file a Self-Assessment return from 2024-25.
Other Points
Childcare
A phased package of support was previously announced for help with childcare costs for accessing 30 hours of childcare for children over nine months old. The free childcare will be available for 38 weeks of the year.
Eligible working parents of three- and four-year-olds already get 30 hours a week of free childcare. The increased offer will be rolled out in stages to allow childcare providers time to be able to implement the changes, making sure the places that are needed are available across the country when the offers are introduced.
From April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare.
From September 2024, 15 hours of free childcare will be extended down to the age of nine months for working parents.
From September 2025, working parents of children aged nine months and upwards will be entitled to 30 hours free childcare per week right up to their child starting school.
Like the existing offer, depending on your provider, these hours can be used over 38 weeks of the year (during school term time), or up to 52 weeks if you use fewer than your total hours per week.
Inheritance Tax
Despite wide speculation that Inheritance Tax was to be amended, no changes were made to the current thresholds and rules.
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