The Chancellor’s Autumn Statement on 22 November 2023 did not include any headline announcements for private clients, despite speculation in the weeks leading up to the speech that the Chancellor would take this opportunity to reduce the rates of inheritance tax, or even abolish the tax completely. Instead, with the government boosted by the recent fall in the rate of inflation to 4.6% and with government borrowing lower than forecast, Chancellor Jeremy Hunt was able to make a U-turn on his previous rejection of tax cuts, and made the following headline announcements.
- National Insurance contributions (NICs) rates – a reduction in the main rate of Class 1 employee NICs from 12% to 10%, to take effect from 6 January 2024; a reduction in the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024; and the abolition of Class 2 self-employed NICs from 6 April 2024.
- Tax relief for businesses – “full expensing” tax relief will be made permanent, thereby reducing the cost of capital for qualifying plant and machinery investment.
- National Minimum & 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.
Future announcements on inheritance tax
The lack of any announcement on inheritance tax this time suggests that this may be earmarked for the 2024 Spring Budget. This would give such policies more of any impact ahead of the General Election.
Inheritance tax has been under government scrutiny for some time following Office for Tax Simplification reports in November 2018 and July 2019, and an All-Party Parliamentary Group report in January 2020; however, so far, no significant changes have been made. The government therefore has proposals at its fingertips for reform and a reduction in rates (currently the main rate is 40%) would prove popular with voters in the lead-up to the General Election. Given that Labour are likely to take the opposite view and retain and/ or increase the tax, reducing inheritance tax (perhaps even on a phased basis, as has been rumoured), could make inheritance tax a battleground in the Election.
This uncertainty around the future of inheritance tax does not help private clients with their estate planning now. All we can advise at present is to bear in mind possible changes, but plan for the rest of this tax year to make use of the existing inheritance tax allowances whilst they are available – the annual exemption and “gifts out of surplus income” exemptions in particular. If a Labour government comes into power in the next tax year, these reliefs could be taken away or reduced. If major inheritance tax announcements are included in the 2024 Spring Budget, private clients should also plan on reviewing their Wills early in the next tax year as any inheritance tax structures in their Wills may need to be looked at.
In addition to the headline policies above, the Autumn Statement included the following further announcements that may be of interest to private clients.
- Pension lifetime allowance – the government will legislate in the Autumn Finance Bill 2023 to remove the lifetime allowance, as originally announced in the 2023 Spring Budget. This will take effect from 6 April 2024.
- Cultural tax reliefs – an HMRC policy paper has been published announcing technical clarifications to Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibition Tax Relief (MGETR). At Spring Budget 2023, the government had extended for a further two years the temporary higher rates of relief of these three Corporation Tax reliefs. The policy paper and accompanying draft legislation clarify some of the relief rules, including eligibility for relief with the aim of ensuring “the fairness and success of the cultural reliefs“.
- Real Estate Investment Trusts (“REITs”) – further to the publication of draft legislation on 18 July 2023, the government will make amendments to the rules for REITs to enhance the competitiveness of the regime.
- Tax avoidance legislation – the government is legislating in the Autumn Finance Bill 2023 to introduce tougher consequences for promoters of tax avoidance schemes. These include a new criminal offence for those who continue to promote avoidance schemes after receiving a stop notice; and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance.
- Annual Tax on Enveloped Dwellings (“ATED“) – the annual chargeable amounts for ATED will be uprated by the September CPI figure of 6.7% for the 2024-25 ATED charging period. This uprating is a routine change.
- Individual Savings Accounts (“ISAs“) – the government is freezing the ISA (£20,000), Junior ISA (£9,000), Lifetime ISA (£4,000 excluding government bonus) and Child Trust Fund (£9,000) limits at their current levels for 2024-25. The government will allow multiple subscriptions to ISAs of the same type every year from April 2024.
- Self-Assessment tax returns – the government will no longer require individuals with income taxed only through Pay As You Earn to file a Self Assessment return from tax year 2024/25.