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Allowances and Reliefs for Businesses, Self-employed and Pensioners in the Finance Bill 2023–24 in the UK

Updated: Dec 30, 2023

The Finance Bill 2023-24 in the UK was a key part of the legislative process following the Autumn Statement presented by Chancellor Jeremy Hunt. Here's a timeline and description of how the Finance Bill 2023-24 was presented and approved:

  1. Autumn Statement Presentation: Chancellor Jeremy Hunt presented the Autumn Statement on 22 November 2023, which outlined the government's financial plans and priorities.

  2. Introduction of the Finance Bill: Following the Autumn Statement, the government introduced the Finance Bill 2023-24 to Parliament on 27 November 2023. This Bill is the legislative document that enacts the tax-related proposals announced in the Autumn Statement​.

  3. Publication of the Bill: The Finance Bill 2023-24 was published on 29 November 2023, providing a detailed legal framework for the implementation of the financial measures outlined in the Autumn Statement.

  4. Parliamentary Readings and Approval: The Finance Bill underwent the usual legislative process in Parliament. It was considered at its second reading on 13 December 2023 and subsequently passed. This step involved debates and discussions in the House of Commons regarding the contents of the Bill.

  5. Committee Stage and Further Scrutiny: After passing the second reading, the Bill was referred to a Committee of the whole House, which was scheduled to consider various parts of the Bill on 10 January 2024. This stage allowed for more detailed examination and potential amendments to the Bill.

The Finance Bill 2023-24 includes various measures, such as making full expensing permanent, creating a new merged research and development (R&D) tax credit, changes to the cash basis for accounting, and creating a new offence for promoters of tax avoidance schemes who fail to obey a 'stop notice'​.

Allowances and Reliefs for Businesses, Self-employed and Pensioners in the Finance Bill 2023–24 in the UK

Overview of Key Business Allowances and Reliefs in Finance Bill 2023-24

The Finance Bill 2023-24 introduces a range of allowances and reliefs designed to support businesses in the UK. These measures aim to foster a favorable environment for investment, innovation, and growth, particularly in the aftermath of recent economic challenges. This article, the first of a three-part series, will delve into the specifics of these business incentives, providing a comprehensive understanding for UK taxpayers and businesses.

Business Rates Relief for Retail, Hospitality, and Leisure

One of the most significant introductions in the Finance Bill is the 2023/24 Retail, Hospitality and Leisure Business Rates Relief scheme. This scheme provides a 75% relief for eligible, occupied properties within these sectors, up to a certain cash cap. This initiative is a response to the unique challenges faced by these industries, especially in light of the ongoing economic recovery efforts.

Permanent Full Expensing and Corporation Tax Reduction

Another crucial aspect of the Finance Bill is the implementation of permanent full expensing, which effectively cuts corporation tax by £11 billion per year. This policy allows businesses to deduct 100% of the cost of a wide range of plant and machinery, such as lorries, drills, and office chairs, from their profits before tax. For every pound a company invests in such assets, their taxes are cut by up to 25p. This measure ensures that the UK continues to have the lowest headline corporation tax rate in the G7, fostering a competitive business environment.

Innovations in Creative Industry Tax Reliefs

The Finance Bill 2023-24 introduces reforms to the film, TV, and video games tax reliefs, converting them into refundable expenditure credits. This change represents a significant shift in how the creative industries will benefit from tax incentives, potentially increasing the accessibility and impact of these reliefs.

Enhanced R&D Tax Reliefs for SMEs

Research and Development (R&D) continues to be a focal point in the UK's strategy to drive innovation. The Finance Bill includes provisions for additional tax relief for R&D intensive small and medium-sized enterprises (SMEs). The government plans to merge the current R&D Expenditure Credit and SME schemes, creating a more streamlined and effective framework for R&D tax incentives. This consolidation is expected to offer more generous support for loss-making R&D intensive SMEs and simplify the overall R&D tax relief process.

Support for Younger Companies and Investors

The Finance Bill extends the Enterprise Investment Scheme and Venture Capital Trust schemes by an extra ten years each to 2035. This extension ensures that younger companies can attract the finance they need to grow and potentially become major players in their respective industries.

Expanding the Scope of Business Support in Finance Bill 2023-24

Building on the foundation laid in the first part of our article, this section will explore further elements of the Finance Bill 2023-24, highlighting additional reliefs and supports that are instrumental in fostering a conducive business environment in the UK.

Reform of Audio-Visual Creative Tax Reliefs

The Finance Bill introduces significant changes to the tax reliefs for the audio-visual sector, especially targeting the film, TV, and video games industries. These reforms are designed to make the tax system more responsive and beneficial for companies operating in these creative fields, further enhancing the UK's position as a hub for creative industries.

Enhancements in Tonnage Tax Regime

The Bill proposes two notable changes in the tonnage tax regime. Firstly, it increases the capital allowance limits for leasing into the tonnage tax, which benefits companies in the shipping industry. Secondly, it allows tonnage tax elections to include third-party ship managers, expanding the scope of businesses that can benefit from this specialized tax regime.

Tax Exemption for Corporate Recipients of Post Office Compensation

A unique inclusion in the Finance Bill is the tax exemption for corporate recipients of compensation payments under the Post Office compensation schemes. This measure addresses specific grievances and provides financial relief to affected entities, showcasing the government's commitment to rectifying past issues.

Amendments to the Real Estate Investment Trust (REIT) Regime

The Bill also brings further amendments to the Real Estate Investment Trust regime, which is expected to streamline operations and provide more flexibility for entities operating within this framework. These changes are aimed at enhancing the attractiveness of REITs as an investment vehicle, thereby bolstering the real estate sector.

Adjustments in Inheritance Tax Reliefs

Significant changes are being made to the geographical scope of agricultural property relief and woodlands relief for Inheritance Tax. This adjustment aligns the Inheritance Tax system with contemporary agricultural and forestry practices, potentially benefiting a wider range of taxpayers engaged in these sectors.

Vehicle Excise Duty Exemption for Ukrainian Vehicles

In response to the ongoing geopolitical situation, the Bill introduces a Vehicle Excise Duty exemption for Ukrainian vehicles. This exemption is part of the UK's broader support to Ukraine, providing tangible aid in a time of need.

Dealing with Tax Avoidance Promoters

The Finance Bill 2023-24 takes a firm stance against tax avoidance by creating a new offence for promoters of tax avoidance schemes who fail to obey a 'stop notice'. This measure underlines the government's commitment to fair taxation and the rule of law.

Increasing Maximum Prison Term for Tax Fraud

A notable punitive measure in the Bill is the increase in the maximum prison term for tax fraud. This change signifies the government's intensified efforts to combat tax evasion and ensure compliance.

Multinational Top-Up Tax: Undertaxed Profits Rule Adoption

The Bill also introduces the multinational top-up tax, adopting the undertaxed profits rule. This is part of a global effort to ensure fair taxation of multinational enterprises and prevent base erosion and profit shifting.

Removal of Stamp Taxes on Shares Charge

Lastly, the Bill proposes the removal of the 1.5% charge on issues and certain related transfers in Stamp Taxes on Shares. This removal is expected to simplify the tax system and reduce the financial burden on companies engaging in these transactions.

Deep Dive into Selected Measures of the Finance Bill 2023-24

Permanent Full Expensing: A Game Changer for Investment

The introduction of permanent full expensing is a landmark decision in the Finance Bill 2023-24. By allowing companies to deduct the full cost of qualifying plant and machinery from their profits before tax, the UK government is effectively providing an £11 billion annual boost to corporate investments. This measure is expected to significantly enhance the investment capabilities of businesses, encouraging them to acquire new assets and upgrade their infrastructure. The impact of this policy is expected to be widespread, benefiting a broad spectrum of industries.

R&D Tax Reliefs: Fostering Innovation

The Finance Bill 2023-24 brings substantial changes to the R&D tax relief system. By merging the R&D Expenditure Credit and SME schemes, the government is simplifying the tax relief process for SMEs engaged in research and development. This consolidation is likely to encourage more businesses to undertake R&D activities, knowing that they have clearer and potentially more generous support mechanisms. The focus on loss-making R&D intensive SMEs is particularly noteworthy, as it targets support where it's needed most, potentially driving innovation in key sectors.

Creative Industries: A New Approach to Tax Relief

The reform of tax reliefs for the film, TV, and video games sectors is a significant move towards supporting the UK's vibrant creative industries. The shift to refundable expenditure credits is expected to make these tax reliefs more accessible and beneficial, especially for smaller and independent creators. This could lead to increased investment and production in these sectors, bolstering the UK's reputation as a global leader in the creative arts.

Enterprise Investment Scheme and Venture Capital Trusts: Extending Support for Startups

The extension of the Enterprise Investment Scheme and Venture Capital Trust schemes until 2035 demonstrates the UK government's commitment to supporting startups and early-stage businesses. This measure ensures that these companies can continue to attract the necessary finance to grow and innovate. The extended timeline provides a stable and predictable environment for investors and entrepreneurs, which is crucial for long-term planning and investment decisions.

Looking Ahead: The Finance Bill's Role in Shaping the Business Landscape

The measures outlined in the Finance Bill 2023-24 represent a strategic approach by the UK government to foster a favorable business environment. By providing targeted reliefs and allowances, the Bill aims to stimulate investment, innovation, and growth across various sectors. As these changes take effect, it will be important for businesses to stay informed and adapt their strategies accordingly.

The Finance Bill 2023-24 is a comprehensive package of reforms that promises to shape the UK business landscape significantly in the coming years. Its focus on investment, innovation, and support for specific industries is a clear indication of the government's priorities in driving economic growth and competitiveness.

Reliefs for Self-employed in Finance Bill 2023–24

The Finance Bill 2023-24 introduces several measures that impact the self-employed in the UK. However, based on the information available from the current resources, a comprehensive analysis extending to 1000 words specifically detailing all the reliefs for self-employed individuals in the Finance Bill 2023-24 cannot be fully provided at this moment. Nonetheless, I can summarize the key points that have been identified:

Change in the Basis of Assessment of Self-employed Profits

Starting from 6 April 2024, the assessment of self-employed profits will be based on the amounts arising between 6 April and 5 April, instead of the profit/loss of an accounting period ending in the tax year. This change in the basis of assessment is significant as it aligns the tax year more closely with actual business performance.

Data Provision Requirements

The UK Government is legislating in the Autumn Finance Bill 2023 to require self-employed individuals (among others) to provide new or improved data to HMRC from the tax year 2025-26. This move aims to enable better outcomes for citizens and businesses, though the specific implications of these data requirements are not fully detailed.

Income Tax Rates and Thresholds

For the tax year 2023/24, the income tax rates and thresholds for the self-employed remain the same as in 2022/23. This includes a basic rate of 20% on income between £12,571 and £50,270, a higher rate of 40% on income between £50,271 and £150,000, and an additional rate of 45% on income above £150,000.

Full Expensing and R&D Tax Credits

While these measures are primarily aimed at businesses, they could also affect self-employed individuals who operate as small businesses. The Finance Bill makes full expensing permanent, allowing 100% deduction of the cost of qualifying plant and machinery from profits before tax. It also creates a new merged R&D tax credit, potentially beneficial for self-employed individuals engaging in R&D activities.

Changes to the Cash Basis

The Finance Bill makes changes to the cash basis, a simplified accounting method. This could impact self-employed individuals, particularly smaller traders, by offering a simpler method of calculating profits and paying income tax.

While these points provide an overview of some of the measures in the Finance Bill 2023-24 affecting self-employed individuals, a detailed analysis of all the specific reliefs and their implications would require more comprehensive information. For a complete understanding of how the Finance Bill 2023-24 impacts self-employed individuals, it is advisable to consult additional resources or seek professional advice tailored to individual circumstances.

Reliefs for the Pensioners in Finance Bill 2023–24 in the UK

Pensions Tax Relief Amendments

The Finance Bill 2023-24 includes amendments to the relief at source legislation concerning pensions tax. These amendments are part of the government's ongoing adjustments to pension taxation, although the specific details of these amendments were not fully accessible.

Removal of Lifetime Allowance

A significant change in the Finance Bill is the removal of the lifetime allowance from pensions tax legislation, commencing in the 2024/25 tax year. This follows the removal of the lifetime allowance charge in the tax year 2023/24. The lifetime allowance has been a limit on the total amount of pension benefit that can be drawn from pension schemes without triggering an extra tax charge. Its removal is expected to provide more flexibility and potentially greater benefits for pensioners.

The Finance Bill 2023-24, a significant legislative piece in the UK, has introduced pivotal changes in pension tax measures, most notably the removal of the Lifetime Allowance (LTA). This bill, published on 29 November 2023, marks a transformative shift in how pension savings and benefits are approached in the UK.

Key Changes and Implications

Abolition of Lifetime Allowance (LTA):

  • Effective from 6 April 2024, the LTA, which previously capped pension savings, will be abolished. This means pension benefits will only be subject to income tax, a change that aligns with the removal of the LTA charge since 6 April 2023.

Introduction of New Lump Sum Allowances:

  • Replacing the LTA are two new allowances: a 'lump sum and death benefit allowance' (LSDBA) of £1.073 million and a 'lump sum allowance' (LSA) of £268,275. These allowances set new maximums for lump sums, with marginal rate income tax applied to amounts exceeding these thresholds.

Pension Commencement Lump Sums (PCLS) and New PCELS:

  • The PCLS will continue to be tax-free but will be capped at £268,275. Additionally, a new form of authorized lump sum, the Pension Commencement Excess Lump Sum (PCELS), will be introduced, subject to income tax.

Death Benefits and Defined Contribution (DC) Funds:

  • The tax treatment of uncrystallised DC funds payable upon a member's death before age 75 will remain unchanged, maintaining the current tax-free status.

Existing Benefit Crystallisation Events (BCEs) and New Relevant BCEs:

  • With the LTA removal, existing BCEs will be redundant. However, new Relevant BCEs (RBCEs) will be introduced to check payments against the new lump sum allowances.

Impact on Non-UK Schemes:

  • The bill aligns the treatment of non-UK pension schemes with UK schemes, removing the need for available LTA in respect of lump sums and LSDBs.

Transitional and Reporting Requirements

  • The bill includes provisions for calculating the availability of the LSA and LSDBA in transitional scenarios. Scheme administrators must provide statements before the end of the tax year 2024-25 for individuals who have taken BCEs before the new regime's implementation.

Increase in Pensions Annual Tax-Free Allowance

From 6 April 2023, the pensions annual tax-free allowance increased by 50% from £40,000 to £60,000. Additionally, the Money Purchase Annual Allowance will rise from £4,000 to £10,000. These increases will allow pensioners and those nearing retirement to save more in their pension pots without facing tax penalties.

Enhanced Tax-Free Lump Sum for Certain Pension Holders

Individuals who hold relevant enhanced or fixed pension protections will be entitled to a tax-free lump sum higher than the standard £268,275 limit, starting from 6 April 2023. This provision is particularly beneficial for those who have protected their pension rights at higher levels.

While these points offer an overview of some of the key changes affecting pensioners in the Finance Bill 2023-24, a detailed analysis covering all aspects of the Bill related to pensioner reliefs and their broader implications is not feasible with the current information. For a comprehensive understanding, it is advisable to consult additional resources or seek professional advice tailored to individual pension circumstances.

As we conclude our exploration of the "Allowances and Reliefs for Businesses in the Finance Bill 2023–24 in the UK," it's clear that this legislation plays a pivotal role in shaping the UK's business landscape. The Finance Bill 2023-24 introduces a range of measures designed to support businesses across various sectors, reflecting the government's commitment to fostering a favorable environment for investment, innovation, and growth.

Key highlights include the extension of permanent full expensing, providing significant tax relief for businesses investing in plant and machinery. This measure alone signifies the government's dedication to encouraging corporate investment and modernization. Additionally, the reform of R&D tax reliefs, particularly for SMEs, underscores a strategic focus on innovation, crucial for the UK's long-term economic competitiveness.

For industries such as the creative sector, the film, TV, and video games tax reliefs have been reformed to offer more accessible benefits, boosting these vibrant and culturally significant industries. The extension of the Enterprise Investment Scheme and Venture Capital Trusts is a clear nod towards supporting emerging businesses and startups, vital for a dynamic and evolving economy.

Moreover, the Finance Bill incorporates adjustments tailored to specific industries, like the tonnage tax regime in shipping and reforms in the Real Estate Investment Trust regime, demonstrating a nuanced approach to diverse sectoral needs.

Implications for Taxpayers and Businesses

The removal of the LTA and the introduction of new allowances represent a significant shift in pension taxation. For taxpayers and businesses in the UK, this change offers more flexibility in pension planning but also necessitates a thorough understanding of the new allowances and tax implications. The transition to this new regime requires careful consideration, particularly for those with existing pension schemes and those planning for retirement.

The Finance Bill 2023-24's approach to pension savings and benefits reflects a broader trend towards simplification and flexibility in financial planning. However, it also underscores the need for individuals and businesses to stay informed and adapt to these evolving tax landscapes.

In summary, the Finance Bill 2023-24 is a comprehensive package that offers a variety of reliefs and allowances, aimed at bolstering the UK business environment. Its focus on investment, innovation, and targeted support sets a solid foundation for businesses to thrive. As these measures take effect, it will be crucial for businesses and financial professionals to stay informed and adapt to leverage the opportunities presented. The true impact of these changes will be observed in the coming years, as they start to influence the UK's economic trajectory and business growth.

*Pl. Note that all the information in this article has been collected from the internet and is not cross-checked.



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