Autumn Statement 2023

Whilst the headlines have been dominated by the cut to National Insurance, the partial sale of the government’s stake in NatWest, and the increases to Universal Credit and the full state pension, we were looking more closely at the announcements that affect taxes on investments. 

Here is our first look at the announcements we think are of interest. 

At a glance 

  • Abolition of the pensions Lifetime Allowance from 6 April 2024 confirmed 
  • Sunset clauses for the EIS and VCT schemes extended to 6 April 2035 
  • Low-level amendments to the UK REIT regime  
  • Permit workplace pension schemes to ‘follow’ worker to new employer 
  • ISA changes including saving in multiple ISAs of the same type, certain fractional shares permitted, and partial transfers between providers 

A closer look 

Anyone who has attended an industry meeting lately will probably have heard someone groan about HMRC’s recent campaign against anyone who thought fractional shares in ISAs were allowed.  While some were arguing that HMRC were mistaken on the legalities, HMRC insisted that they were right and that ISA providers who had allowed their customers with stocks and shares ISAs to hold fractional shares needed to come clean, in a manner of speaking. 

The Autumn Statement included a new policy that “[allowed] certain fractional shares contracts as a permitted investment”.  The devil is in the detail, of course, and that word “certain” is doing an awful lot in that sentence, but nevertheless we wait to see what HMRC are thinking. 

Sticking with ISAs:  The requirement that a saver may only subscribe to one ISA of a type per year, meaning one cash ISA, one stocks and shares ISA etc. per year, has been in place since the regime was first created.  The announcement yesterday that the government has decided to get rid of this rule, along with allowing partial transfers between providers and developing a digitalised ISA reporting system, means greater choice for clients and greater competition among providers. 

The charge on exceeding the pension Lifetime Allowance (LTA) had already been abolished in the Spring Statement, but a few small technicalities remained.  For one, the LTA does still exist, albeit with a charge of zero; for another, the maximum tax-free lump sum that an individual can withdraw from their pension remains at £268,275, being 25% of the LTA of £1,073,100. 

The amendments introduced yesterday resolve the outstanding points for the removal of the LTA.  Savers and investors with larger pension pots or higher incomes will benefit from tax relief on all their pension contributions. 

The government has been calling for greater investment into UK plc for some time now – though without much success even on their own turf – so let’s now look at changes to two schemes specifically for investment in UK businesses. 

The Enterprise Investment Scheme (EIS) is for UK investors in small, usually unlisted UK companies, while Venture Capital Trusts (VCTs) are UK listed companies which themselves invest in unlisted UK businesses.  Investors who subscribe for shares in EIS companies, or who buy shares in VCTs (whether newly issued or on the secondary market) get various tax reliefs, including 30% of the purchase amount off their income tax bill. 

Under EU State Aid laws, the UK had ‘sunset clauses’ put in to prevent tax relief on share subscriptions from 6 April 2025.  These clauses have now been extended to 6 April 2035, ensuring that businesses (and prospective entrepreneurs) can plan ahead with confidence, while investors know they will continue to have options for tax-efficient investing. 

Finally, some small amendments to the regime for UK Real Estate Investment Trusts (REITs).  These mostly won’t affect investors directly but they allow REITs to, for example, exempt gains on investments in property-rich funds in addition to the existing exemption for properties themselves.  There are “consequential changes” for investors who are not resident in the UK and invest in UK REITs, so we will see what comes in the Finance Bill. 

A look ahead 

Given HMRC has ramped up its investment in the offshore non-compliance teams, and received higher revenue in penalties back as reward, we expect that perhaps some further announcements will be made in this area. 

Another pet subject of ours lately has been the new boxes on the tax return for reporting gains on disposals of excluded indexed securities (XIS).  With the Self Assessment tax return deadline being 31 January, the Chancellor would only have perhaps six weeks to study the preliminary data from taxpayers when making his Spring Statement – but it would not be surprising if he chose to introduce further regulation for the 2024-25 tax year.  Watch this space. 

We will continue to add thoughts and insights to our website and social media as the implications of the Autumn Statement become clear and as we turn to the new tax year.