Autumn Statement 2023: A Summary

On Wednesday 22nd November the Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement.  There has been much speculation in the media preceding The Autumn Statement that the Chancellor would look to cut tax rates, potentially on income tax or inheritance tax.  As it turned out these speculated tax cuts did not materialise, instead the headline grabbing announcement was a larger than expected cut in National Insurance for employees and the self-employed.

It was presented as a tax-cutting budget. The reality is that frozen allowances and thresholds mean that the tax burden continues to rise. It is difficult to be too optimistic for the economy with downgraded growth expectations and some potentially unrealistic restraint in departmental spending pencilled in over the next five years. Of course, the big question is who will be in charge. That some tax reductions are being signalled now increases expectations that we could be looking at a spring general election. It could be that the March Budget is the Conservatives last fiscal event and chance to make their case to the country – and maybe we will see the more substantial tax changes being announced then. Watch this space.

National Insurance Contributions

The headline rate of Employee (Class 1) National Insurance Contributions has been cut by 2% falling from 12% to 10%. Perhaps even more surprisingly, the Chancellor confirmed that this cut would take effect from 6 January 2024 rather than April 2024.

The flat rate class 2 NIC will be abolished for self-employed individuals with profits above £12,570. The class 4 rate of NIC will be reduced from 9% to 8%.

Business Growth Measures

The Chancellor confirmed that ‘Full Expensing’, which provides companies with 100% tax relief on qualifying capital expenditure, will be made permanent, for companies investing in plant and machinery. The aim being to stimulate business growth, investment and increase employment.

Other measures included a fourth consecutive freeze in the small business multiplier for business rates and confirmation that the 75% discount for Leisure, Hospitality and Tourism businesses would remain for a further year.

The R&D Expenditure Credit and SME schemes will merge from April 2024 onwards. The rate of tax for loss-making companies within the merged scheme will fall from 25% to 19%. The intensity threshold in the R&D intensives scheme will reduce from 40% to 30% for accounting periods that start on or after 1 April 2024. Companies that dip under the 30% threshold will also continue to receive the relief for an additional year.

Making Tax Digital

In December 2022, the government set out a revised plan for introducing MTD for Income Tax Self Assessment (ITSA). Sole traders and landlords with income over £50,000 will be mandated to join MTD from April 2026, followed by those with income over £30,000 from April 2027. These requirements apply to around 1.75 million customers.

Following this engagement, the government will keep under review the decision on further mandation of businesses and landlords with income below £30,000.

Businesses and landlords with income below £30,000 will still be able to register voluntarily for MTD.

Other measures

Elsewhere, the Chancellor announced an increase in the National Living Wage to £11.44 an hour, which may be an issue for some sectors, such as hospitality. A fund of £50m will be made available to pilot ways of increasing apprenticeships in key growth sectors.

All alcohol duty has been frozen until August 2024.

There will also be changes to ISAs such as being able to open more than one ISA of the same type each year. This provides savers more choice over their investments & financial futures.

Additionally, it was announced that Off Payroll Rule changes will allow HMRC to account for taxes already paid when calculating a deemed employer’s PAYE liability under the off-payroll working rule.

From 6 April 2024 the turnover limit restrictions on the use of the cash basis will be removed, reducing the complexity of tax returns and making tax simpler for small businesses.  There were also announcements regarding aligning the current differences between the cash basis and the accruals basis in the utilisation of losses and interest costs.

As always we will digest more details over the next few days but please get in touch with us if you want to discuss the impact of these announcements on you or your business.