1. National Insurance Contributions (NICs)

One of the headline announcements is changes to the National Insurance rates, which apply throughout the UK, including Scotland. In contrast, a change to rates of income tax would not have impacted Scottish taxpayers.

The highest rate paid by employees, currently 12%, will fall by 2% to 10%, saving £754 a year for employees earning £50,270 and above. Payroll teams will have to focus on this as this change comes into effect from 6 January 2024. The current 2% rate and the 13.8% employer NICs will remain the same.

There are also cuts for the self-employed, but these changes do not come into effect until April 2024. Compulsory Class 2 NICs, which are paid by self-employed persons, will be abolished. Class 2 NICs are currently paid at a flat rate of £3.45 per week. Self-employed persons who voluntarily pay Class 2 NICs (for those earning less than the small profits threshold of £6,725) may continue to do so with this scheme being unchanged.

Class 4 NICs are also paid by self-employed persons and the highest rate applicable on profits between £12,570 and £50,270 is currently 9%. From April 2024, this will be reduced to 8%. Again, the 2% rate remains unaffected.

2. Capital Allowances

The announcement likely to have the biggest impact for businesses is in relation to Capital Allowances. At the Spring Budget 2023, the Chancellor introduced two new capital allowances as set out below, to apply on a temporary basis until 31 March 2026. These will now be applied permanently and apply equally in Scotland:

  • full expensing which allows taxpayers to deduct 100% of the cost of certain plant and machinery from their profits before tax. It applies to spending on main rate equipment such as plant, machinery and IT equipment; and
  • the 50% first-year allowance allowing taxpayers to deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances.

3. Research & Development

The existing Research & Development Expenditure Credit (RDEC) and small and medium-sized enterprise (SME) schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 to be claimed under the new merged scheme.

The notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than the 25% main rate currently applied under the RDEC scheme.

The intensity requirement for R&D intensive SMEs will be reduced to 30% from 40% for accounting periods starting on, or after, 1 April 2024, bringing approximately 5,000 more SMEs into scope.

Additionally, a one-year grace period will be applied to SMEs which successfully claimed the relief but fail to meet the threshold in a subsequent year. This change means that they can continue to claim for the following year, provided they meet the other conditions.

These measures apply equally in Scotland.

4. Freeport Tax Relief Extension

The sunset date for the Freeport tax reliefs will be extended to 30 September 2031 for Freeports in England. In each Freeport, the extension will be conditional on agreement of delivery plans and will be legislated once those delivery plans are agreed.

Currently, the sunset date for the SDLT relief (LBTT in Scotland and LTT in Wales), enhanced structures and buildings allowances, and enhanced capital allowances for plant and machinery is 30 September 2026. Secondary Class 1 NICs relief is available on earnings of eligible employees starting by 5 April 2026 only and will continue to apply for 36 months per employee (there have been no changes to the Class 1 NIC relief).

The Chancellor will engage in discussions with the devolved administrations in Scotland and Wales to discuss the potential extension of Freeport tax reliefs in Scotland and Wales from five to 10 years.

5. Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)

The EIS and VCT reliefs were due to expire after 5 April 2025. These will now be extended to 5 April 2035, lengthening the period of availability of income and capital gains tax relief for investors in new shares issued before 5 April 2035 by EIS qualifying companies and VCTs.

Scottish investors will benefit from the extensions to these schemes.

6. Annual Tax on Enveloped Dwellings (ATED)

ATED is an annual tax payable by non-natural persons that own UK residential property valued in excess of £500,000. The annual charges will be increased by 6.7% from 1 April 2024 in line with the September Consumer Price Index.

The increased charge applies equally in Scotland.

7. Cash Basis Expansion

Small self-employed businesses such as sole traders or partnerships with a turnover of £150,000 or less a year can use the cash basis method of accounting. Cash basis is a simplified way of calculating taxable profits for income tax purposes. The Chancellor has announced that, from 6 April 2024, the cash basis will be set as the default method for small businesses, and the turnover, interest and loss relief restrictions that currently apply will be removed.

This applies equally in Scotland.

8. Growth Market Exemption

The stamp duty and stamp duty reserve tax relief for shares listed on growth markets will be extended to include smaller, innovative growth markets.

The change will allow FCA-regulated multilateral trading facilities that are operated by investment firms to access the exemption. The average market capitalisation limit of companies in such markets will increase from a cap of £170 million to £450 million from 1 January 2024.

This applies equally to investors based in Scotland as in the rest of the world.

9. Real Estate Investment Trust Regime (REIT)

The definition of "Institutional Investor" will be amended to require authorised unit trusts, open-ended investment companies and collective investment scheme limited partnerships to meet a genuine diversity of ownership condition or non-close condition. The amendment will also require persons acting in the course of a long-term insurance business to meet a non-close condition in order to qualify as an institutional investor.

Co-ownership Authorised Contractual Schemes that meet a genuine diversity of ownership condition or non-close condition will be added to the list of institutional investors.

Insurance companies will be able to hold an interest of 75% or more in a group UK REIT.

The definition of "Holding Excessive Rights" will be amended to prevent investors from being considered as "holding excessive rights" where they are taxed at a particular rate, or not at all, on distributions from the REIT under the terms of a double tax agreement. This will not apply where it is conditional on holding an interest of a certain size.

The amendments to the REIT regime are intended to enhance competitiveness and apply equally in Scotland.

10. Construction Industry Scheme (CIS)

Compliance with VAT obligations is to be added to the CIS gross payment status compliance test. The change will also expand HMRC's powers to remove gross payment status immediately in cases of serious non-compliance involving VAT, Income Tax Self-Assessment, Corporation Tax Self-Assessment and PAYE.

The Regulations are to follow but they will set out exemptions to VAT compliance and will remove the majority of payments made by landlords to tenants from the scope of the scheme. This is a very welcome clarification.

The relevant legislation will come into force from 6 April 2024 and will apply equally in Scotland.

11. Alcohol Duty Rates

The last alcohol duty increase took place on 1 August 2023. The Chancellor has committed to freezing this increase until 1 August 2024 and the government will not make its annual uprating decision until the Spring Budget 2024 to allow businesses time to adapt to the new system.

12. Plastic Packaging Tax

The rate at which Plastic Packaging Tax is paid per tonne will be increased in line with the Consumer Price Index. The tax will rise from £210.82 to £217.85 per tonne above the threshold, from 1 April 2024.

This applies equally in Scotland.

13. National Living Wage

Although it was not announced during the Autumn Statement, the National Minimum Wage and National Living Wage were increased on the day prior to the Chancellor's Autumn Statement. From 1 April 2024, Britain's National Living Wage will increase by 9.8% to £11.44 an hour.

As part of the change, the separate National Minimum Wage category of 21-22 year olds has been abolished meaning that those aged 21-22 will now benefit from the increased National Living Wage.

These changes apply to Scotland as well as the rest of the UK.