2023 Autumn Statement: the tax changes

Under watching eye and political pressure, the Chancellor of the Exchequer, Jeremy Hunt, presented his 2023 Autumn Statement on 22/11/23.

Operating under a slightly less turbulent background than his first statement, Hunt gathered his papers to focus on short-term tax cuts instead of the expected long-term issues and maintenance of expenditure – perhaps saving those for the much-anticipated Spring Budget.

These tax cuts contrast with Hunt’s previous claims that tax cuts were ‘virtually impossible’. He suggests this is now possible because the achievement of halving inflation in 2023 marked an economic inflection. Though it is also fair to note that this statement is underpinned by the upcoming election at the end of 2024.

So, what did he announce and how does it affect you as a high-net-worth individual?

The economics of it all

In the Spring of ‘23, the Office for Budget Responsibility (OBR) envisaged a rather bleak outlook of government borrowing, placing their estimates at around £131.6 billion[1]. Now, that projection has reduced by around £16 billion due to expected tax revenue[2].

This has given Chancellor Jeremy Hunt some economic wiggle room to implement some unexpected changes in his 2023 Autumn Statement.

Personal Tax

The Statement covered several personal tax angles. Perhaps most relevant to you as a high-net-worth individual is:

Income Tax:

There is no change here, with personal allowance for income tax remaining unchanged at £12,570, and the higher rate threshold remaining at £50,270.

The 45% additional rate threshold will also remain at £125,140.

Income Tax for trusts and estates:

As previously announced, for 2024/25, the standard rate band for trusts will no longer be applicable. Trusts with an income of £500 or less will instead have no tax to pay. If a settler has more than one trust, however, the threshold amount will be calculated at £500 divided by total number of existing trusts (with a £100 minimum) – if this threshold is exceeded, trust tax rates will then apply to all income.

Dividend Tax:

Announced before the Autumn Statement, dividend tax will be halved from £1,000 to £500.

National Insurance Contributions:

The upper earnings limit and class 4 upper profits limit will stay aligned with the higher rate threshold of £50,270 until 2028.

Pensions:

A number of documents have been published by the government relating to the pensions framework, including calls for individuals to move towards having one pension pot for life, as well as the creation of a public consolidator run by the Pension Protect Fund for defined benefit schemes.

Capital Gains Tax:

As previously announced, the annual exemption amount for individuals and personal representatives has been halved to £3,000, while the exempt amount for trusts will be cut to £1,500.

Inheritance Tax:

This was perhaps the most anticipated topic for the 2023 Autumn Statement. But little has changed.

The nil rate band will remain at £325,000 while the residence nil rate band (RNRB) will stay at £175,000 while the RNRB taper will remain in effect where the value of the deceased’s estate is over £2 million.

Individual Savings Accounts (ISAs):

ISAs are perhaps the area of personal tax most effected (come April 2024) by the statement.

Investors will now be able to make multiple subscriptions to ISAs of the same type each year, and partial transfers of ISAs in-year between providers is to be allowed.

If you have worked with your children to open them an ISA, the minimum account opening age for adult ISAs is now to be set at 18, instead of the current cash-only adult ISAs for 16–17-year-olds.

There were also changes made to how ISAs can be invested. Innovate ISAs will expand to allow investments in Long-Term Asset Funds and open-ended property funds with extended notice periods.

Emerging unscathed from the statement, though, are the contribution limits which remain unchanged.

Venture Capital Schemes and the sunset clause:

The sunset clauses which apply to Enterprise Investment Schemes and Venture Capital Trusts will now be extended ten years to April 2035.

Business Tax

Full expensing (capital allowances):

Originally due to expire in March 2026, full expensing is now being made permanent.

This business tax allowance allows companies who incur qualifying expenditure on the provision of new plant and machinery to claim a 100% first year allowance for main rate expenditure and a 50% allowance for special rate expenditure.

Expenditure on plant and machinery for leasing, on the other hand, is excluded from this allowance.

Business Rates:

While the standard multiplier will be uprated by 6.7%, the small business multiplier is to be frozen for another year, while the 75% relief for retail, hospitality, and leisure properties is to be extended for 2024/25.

Investment Zones:

The investment zones programme will be extended to ten years. And, new investment zones in Greater Manchester, West Midlands, and East Midlands, have been announced in addition to two zones in Wales.

Top-up Tax:

The Chancellor is making amendments to multinational and domestic top-up taxes. This is in attempt to reflect recent internationally agreed guidance and make clarifications following consultation.

In addition to this, the Undertaxed Profits Rule will be added to the multinational top-up tax for accounting periods on or after December 2024.

To learn more, read the full Autumn Statement.

[1] https://obr.uk/docs/dlm_uploads/OBR-EFO-March-2023_Web_Accessible.pdf

[2] https://obr.uk/year-to-date-borrowing-moves-further-below-our-forecast/#:~:text=The%20ONS%20release%20this%20morning,consistent%20with%20our%20March%20forecast.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.