Autumn Statement 2023

You can read the documents accompanying the Autumn Statement on the gov.uk website by clicking here.

National Insurance

• Starting 6 January, the National Insurance rate will be reduced from 12% to 10%.
• “Class 2” National Insurance contributions will be abolished, and “Class 4” contributions will be reduced by one percentage point.

The CIOT has highlighted that the Chancellor has set a challenging timetable for implementing cuts to national insurance rates announced today. The Institute also points out that employer national insurance rates continue to be an incentive for businesses to contract with people as self-employed rather than employing them.

In an analysis for the Scottish media CIOT observed that the NI cut for employees will apply to Scottish taxpayers, but existing income tax divergence means some Scots will continue to pay more income tax and National Insurance combined than taxpayers in the rest of the UK, in particular, those with earnings between the Scottish and UK higher rate thresholds who will pay a marginal tax rate of 52%.

LITRG pointed out that class 2 NICs will not be an immediate abolition as it will continue to exist for those who wish to make voluntary contributions, which will broadly apply to those self-employed with income under £6,725.

Corporation Tax

• “Full expensing” for capital allowances has been made permanent.
• Streamlining research and development tax incentives by merging the current R&D Expenditure Credit (RDEC) and SME schemes from April 2024.
• The government will restrict the use of nominations and assignments for R&D tax credit payments
• Introducing the Undertaxed Profits Rule, aligned with the G20-OECD global minimum tax framework, into the UK for accounting periods starting on or after 31 December 2024.

The CIOT welcomed the announcement that full capital expensing will be made permanent but says that the Government should now look at what is eligible for the relief.

The CIOT warned that rushing through the merger of the UK’s two R&D tax reliefs from April 2024 risks undermining the effectiveness of the new relief at delivering innovation and growth.

The CIOT's sister body, the ATT, warned that the introduction of a new R&D regime from next April will be “near to impossible” for businesses, agents and HMRC to adjust to.

ATT also warned that making “full expensing” for plant and machinery costs permanent will do nothing to help the 99% of companies whose qualifying expenditure on plant and machinery is below £1 million per annum and for whom the Annual Investment Allowance already provides full relief.

Tax administration

• For now, Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will only apply to sole traders and landlords whose turnover is above £30,000. The scheme was originally proposed to cover those with self-employment or property incomes above £10,000. Some welcome easements were also announced today for those who remain in scope. These include simplification of the quarterly updates (which will now be cumulative), removing the need to file End of Period Statements for each income source, and simplified record keeping and reporting for landlords of jointly-owned properties.
• Expanding and simplifying the income tax cash basis for self-employed individuals and partnerships (from 6 April 2024)
• Strengthening HMRC's debt management capabilities through a £163 million investment, enabling improved handling of tax debts and faster resolution for both individual and business taxpayers.
• Removal of Self Assessment filing threshold for individuals with income over £150,000 which is taxed via PAYE

The chair of the joint CIOT / ATT Digitalisation and Agent Strategy Committee welcomed the announcement that MTD for ITSA will only apply to sole traders and landlords whose turnover is above £30,000. Last week, CIOT and ATT wrote to the new Financial Secretary to the Treasury expressing concerns about the programme, including its costs and benefits, and how ready both HMRC and taxpayers are for the new system.

Changes to the cash basis accounting method will make it more attractive, but it still won’t be the right answer for everyone, ATT have warned.

Other employment taxes and related

• The government will legislate to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules.
• The national living wage will increase to £11.44

The off-payroll announcement is welcome, said the CIOT. The Institute has been calling for this move, saying it would be fairer and more efficient than the current system which obliges HMRC to notify affected workers of their recategorisation and requires them to recalculate their taxes, amend tax returns and submit claims for overpayment relief.

Whilst welcoming the increase in the national living wage, LITRG highlighted that some self-employed universal credit claimants may be negatively impacted by the rate increase - even though they are not entitled to it. This is because the artificial income figure sometimes used to work out a self-employed person’s entitlement to universal credit, known as the minimum income floor, is directly linked to the minimum wage.

Other business tax

• 75 per cent business rates discount for the hospitality, retail, and leisure sectors extended for a further year
• Consultation on reform of remote gambling (meaning gambling offered over the internet, telephone, TV, and radio) 
• Tax reliefs for freeports and investment zones extended  

Indirect taxes

• Alcohol duty will be frozen until next August.
• Adjusting duty rates on all tobacco products with an increase by RPI +2%