AUTUMN STATEMENT 2023
22nd November 2023
As I am sure you are aware, The Chancellor has delivered the Autumn Statement for 2023.
Below are some of the key points from this that may be of interest, some of which were announced in previous financial statements :
Income Tax
Income Tax thresholds will remain frozen until April 2028.
Therefore:
Current Year: 2023-24 (6th April 23 to 5th April 24)
20% Tax Band from £12,570 to £50,270
40% Tax Band from £50,270 to £125,140
45% Tax Band from £125,140
Year: 2024-25 (6th April 24 to 5th April 25)
20% Tax Band from £12,570 to £50,270
40% Tax Band from £50,270 to £125,140
45% Tax Band from £125,140
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The Personal Tax-free Allowance remains frozen at £12,570.
Note: Personal Allowance = amount of income tax-free a person can earn if total income under £100K; after £100K the amount is decreased by £1 for every £2 of income up to £125,140. If Income is equal to or above £125,140 then the Personal Allowance is not applicable.
National Insurance
A percentage reduction of 2% will be made to Employee NI from 6th January 2024 (so from Quarter 4 of 23/24).
A percentage reduction of 1% will be made to Sole Traders NI from 6th April 2024.
Class 2 NI for the Self Employed (which was £3.45per week) will be abolished from 6th April 2024.
NI Thresholds will remain frozen until 2028.
Therefore:
Current Year: 2023-24 (6th April 23 to 5th April 24)
- Employee 12% NI threshold (above which NI is paid) = £12,570
- Employee 12% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270
- Employee 2% NI Upper Earnings over £50,270
- Employers NI Allowance : for Employers that pay staff, where Employers NI is applicable = £5,000
- Sole Trader 9% NI threshold (above which NI is paid) increased = £12,570
- Sole Trader 9% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270
- Sole Trader 2% NI Upper Earnings over £50,270
- Sole Traders Class 2 NI = £3.45 per week
Year: 2024-25 (6th April 24 to 5th April 25)
- Employee 10% NI threshold (above which NI is paid) = £12,570
- Employee 10% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270
- Employee 2% NI Upper Earnings over £50,270
- Employers NI Allowance : for Employers that pay staff, where Employers NI is applicable = £5,000
- Sole Trader 8% NI threshold (above which NI is paid) increased = £12,570
- Sole Trader 8% NI Upper Earnings Limit (up to which the full rate NI is paid) = £50,270
- Sole Trader 2% NI Upper Earnings over £50,270
Dividends
The 0% band was reduced from £2,000 to £1,000 in April 2023 and then will be further reduced to £500 in April 2024.
Therefore:
Current Year 2023-24 (6th April 23 to 5th April 24)
0% Tax Band from £0 to £1,000
8.75% Tax Band from £1,001 to £50,270
33.75% Tax Band from £50,271 to £125,140
39.25% Tax Band from £125,140
Year: 2024-25 (6th April 24 to 5th April 25)
0% Tax Band from £0 to £500
8.75% Tax Band from £500 to £50,270
33.75% Tax Band from £50,271 to £125,140
39.25% Tax Band from £125,140
Making Tax Digital : Sole Traders & Property Landlords
HMRC have been assessing over the last few months whether Sole Traders & Landlords with Incomes in the range of £10,000 and £30,000 will need to report additionally to HMRC after all (they stated this would not be the case in December 2022).
I am pleased to report that today the government has announced the result of their summer analysis and that they will be maintaining the current MTD threshold at £30,000. Therefore, only clients with Sole Trader or Landlord Income of over £30,000 will fall within the Making Tax Digital rules.
Background:
In 2020 HMRC announced that Sole Traders & Landlords with Incomes in excess of £10,000 per year would have to declare income and expenses every quarter, rather than just annually via Self Assessment, from April 2024.
Already, VAT registered businesses have to action in this way.
This is in line with the Government's 'Making Tax Digital' (MTD) directive where taxpayers from certain areas have to declare that they use Digital Records and declare information every 3 months - so 4 Quarters to be reported plus the usual Self Assessment.
Aims, from a Government perspective, are to ensure all taxpayers are declaring their income correctly and fully (I would argue that this is very much the case already but..) and to have information as to what to expect from tax receipts per quarter rather than at the end of the financial year.
This could lead to HMRC asking for tax payments per quarter but this has not yet been announced.
There was quite a backlash to the above from Businesses, Landlords and the Accountancy profession as this is seen by many (including myself) as needless, costly bureaucracy when HMRC's current systems are barely fit for purpose.
Fast forward to December 2022 and HMRC stated that MTD for Sole Traders & Landlords would change as follows:
- MTD for Sole Traders & Landlords will be delayed by two years until April 2026
- The Income threshold for mandatory reporting via MTD will be £30,000 rather than £10,000
- Landlords or Sole Traders that have a turnover for either business above £30,000 but less than £50,000 will not be mandated into MTD until April 2027
I thought this was the end of the matter for 95% of my clients as they have Income less than £30,000, with the 5% above to be helped when the time comes, but HMRC launched a further assessment of who falls within the scope of the project in July 2023.
PAYE
Limited Company Director Salary:
- The maximum level of Annual Salary for Limited Company Directors will remain at £9,100 (NI Secondary Employers Threshold) = £758 pcm until April 2028 . This is the maximum Salary that can be taken before any Income Tax or NI is due and saves a Sole Director Company circa £1,730 in Corporation Tax per year
- Even though £0 NI will become due, the above Director Salary still counts as a 'State Pension Year' as it is over the 'Small Profits NI Threshold' of £6,396 .
National Living Wage
The National Living Wage (NLW) will increase from £10.42 per hour to £11.44 per hour from 6th April 2024
VAT
The VAT Registration Threshold is to be reviewed and may be cut from the current level of £85,000. The threshold will remain at £85,000 during this review until at least April 2026.
Savings/ Interest Taxation
Bank/Savings interest are still tax-free up to £1,000 for Basic Rate Tax Payers (20% up to £50,270 of income ) and £500 for Higher Rate Payers (40% over £50,270 of income) for higher rate payers. Additional Rate Taxpayers (income over £125,140 45% tax rate) must declare Bank/ Savings interest of all amounts (except ISAs) via Self Assessment as is fully taxable.
Corporation Tax
No change: 19% on Net Profits up to £50K and and then a tapered increase up to 25% over £250K.
Capital Gains Tax
The Tax Free Allowance was cut from £12,300 to £6,000 from April 2023 and will be further reduced to £3,000 in April 2024
Therefore:
Current Year: 2023-24 (6th April 23 to 5th April 24)
20% Income Tax Band from £6,000 to £50,270 = CGT Rate of 18%
40% Income Tax Band above £50,270 = CGT Rate of 28%
Year: 2024-25 (6th April 24 to 5th April 25)
20% Income Tax Band from £3,000 to £50,270 = CGT Rate of 18%
40% Income Tax Band above £50,270 = CGT Rate of 28%
Note:
When an Additional Property (non-main home) is sold HMRC requires a CGT return and any payment of CGT due within 60 days of the completion date.