Autumn Statement 2023: Income Tax

The Chancellor announced the following measures on Income Tax in his 2023 Autumn Statement.

Income Tax rates and thresholds

• No changes have been announced to Income Tax rates and the thresholds remain locked until 2028 as promised in Spring Budget 2023.
• The Blind Person’s Allowance (BPA) and Married Couple’s Allowance (MCA) will be uprated by the September CPI figure of 6.7% in 2024-25.
  • The BPA will be valued at £3,070 and the MCA will be valued at between £4,280 and £11,080.
• See Income Tax Rates

Expanding the cash basis

From 6 April 2024:

• Legislation will be introduced by Autumn Finance Bill 2023 to set the cash basis as the default method for calculating trading profits for the self-employed and partnerships, by removing the turnover, interest and loss relief restrictions that currently apply.
  
  • Those businesses with more than £500 of interest costs will no longer be restricted to a £500 deduction for those interest costs and will be able to deduct these in full, providing the costs are incurred wholly and exclusively for the purposes of the trade.
  • An election will no longer be required to use the cash basis, instead those businesses not wishing to calculate their profits using the cash basis will need to make an election to use the accruals basis.
• The measure will not affect companies, property businesses or businesses that are otherwise excluded from using the cash basis, such as mixed partnerships, Limited Liability Partnerships (LLPs), or businesses claiming farmers’ or artists’ averaging relief.
• See Cash Basis for Income Tax

Simplifying Making Tax Digital (MTD) for Income Tax Self Assessment

The government plans to make design changes to Making Tax Digital for Income Tax Self Assessment by:

• Simplifying the requirements for all taxpayers in providing quarterly updates and for taxpayers with more complex affairs, such as landlords with jointly-owned property.
  • Rather than requiring a total for the three-month period covered by each update, each update will be a cumulative total of income and expenses accumulated for the tax year to date. This should avoid the need for corrections to previous updates when errors have been identified.
  • Joint property owners will be able to decide whether they want to provide quarterly updates or not and will have less onerous digital record-keeping requirements.
• Removing the requirement to provide an End of Period Statement.
• Exempting some taxpayers from MTD altogether, including those without a National Insurance number and foster carers.
• Enabling taxpayers using MTD to be represented by more than one tax agent.
• Draft regulations will be published for technical consultation later in 2023 with a large-scale public beta testing programme commencing in 2025.
• The policy paper confirms that MTD for ITSA will not be extended to businesses with income below £30,000 for the foreseeable future though this will remain under review.
• See Making Tax Digital Timeline & Index

Penalty reforms for Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) volunteers

From Royal Assent of Autumn Finance Bill 2023:

• Taxpayers who volunteer to adopt MTD for Income tax early, i.e. from April 2024, will be able to benefit from the penalty reforms that are to apply to MTD for ITSA.
• This means they will benefit from the new points-based penalty regime for late filing and late payments before taxpayers who do not volunteer for early adoption of MTD for ITSA. 
• See Penalties: Late Filing MTD

ISA savings

From 6 April 2024:

• The ISA annual subscription limit will remain unchanged at £20,000.
• The annual subscription limit for Child Trust Funds will remain unchanged at £9,000.
• The annual subscription limit for Junior ISAs will remain unchanged at £9,000.
• The annual subscription limit for Lifetime ISAs will remain unchanged at £4,000.

Changes are to be made to ISAs to simplify the scheme and widen the scope of investments that can be included. 

From 6 April 2024: 

• Multiple subscriptions in each year to ISAs of the same type will be allowed. 
• The requirement to make a fresh ISA application where an existing ISA account has received no subscription in the previous tax year will be removed. 
• Partial transfers of current-year ISA subscriptions between providers will be allowed. 
• The account opening age for adult ISAs will be harmonised to 18.
• Long-Term Asset Funds will be permitted investments in the Innovative Finance ISA.
• Open-ended property funds with extended notice periods will be permitted investments in the Innovative Finance ISA.

From an unknown date, the government intends to permit certain fractional shares contracts as eligible ISA investments and will engage with stakeholders on implementation.

See ISA guide

Training costs for the self-employed

• HMRC will clarify guidance on what training costs can be deductible for tax purposes.
• This will ensure that businesses can be confident that updating existing skills or maintaining pace with technological advances or changes in industry practices, are allowable costs when calculating the taxable profits of a business.
• See Training costs

Compensation Schemes: Post Office Limited

• Legislation will be introduced to exempt top-up payments made under the Suspension Remuneration Review (SRR) scheme and payments yet to be made under both SRR and the Post Office Process Review Scheme from Income Tax, National Insurance contributions and Capital Gains Tax. 
• See Post Office Compensation Scheme

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) extension

• Legislation will be introduced in Autumn Finance Bill 2023 to extend the existing sunset clauses for the EIS and VCT scheme from 6 April 2025 to 6 April 2035.
• This will continue the availability of Income Tax and Capital Gains Tax reliefs for investors in new shares issued before 6 April 2035 by EIS qualifying companies and VCTs. 
• See EIS Subscriber Guide

Useful links

Autumn Statement 2023: At a glance
The Chancellor, Jeremy Hunt, presented his Autumn Statement 2023 speech on Wednesday 22 November. This is our 'At a glance' summary of the key tax announcements and measures. 

External links

Policy paper:Expanding the cash basis

Consultation outcome: Expanding the cash basis

Corporate report: Outcome of the Making Tax Digital Small Business Review

Policy paper: Penalty Reform for Making Tax Digital for Income Tax Self Assessment volunteers