23rd November 2023
It was a headline grabbing Autumn Statement with some tax cuts for employees, self-employed, and businesses. Though, after the Spring Budget announcements on the freezes to income tax thresholds and the increase of the main rate of Corporation Tax from 01 April 2023, the tax burden remains at record levels for individuals and businesses.
Tax cuts offered to businesses will not affect most SMEs, but the increase in the Living Wage by 9.8% will no doubt see wage costs across the board increase as the bottom end increases. Businesses will have to think carefully about pricing to keep profitability whilst remaining competitive in a challenging environment. Despite that, the Office of Budget Responsibility is forecasting these changes to increase the rate at which inflation falls.
What hasn’t changed?
Corporation tax – still chargeable at 25% main rate and 19% small profits rate
Inheritance tax – despite significant speculation in the lead up to the Statement, no changes were made to IHT
Capital gains tax – no changes made to Capital Gains Tax, despite historic calls for major reform
Income tax and thresholds – as was announced in the Spring Budget, the thresholds for income tax are all frozen
With an election now expected to occur in Spring/Summer 2024, perhaps the ‘exciting’ tax policies are being held back in reserve for manifestos.
Autumn Statement 2023
Forecast
- Growth expectations have been significantly reduced, but still forecasting economic growth into 2024 and 2025
- Inflation expected to persist with a fall to the target of 2% only forecast in 2025
Personal taxes
- Self employed National Insurance reduced:
- Class 2 abolished, though breaching the Class 2 limits will still qualify the year for state pension entitlement
- Class 4 rate reduced from 9% to 8% on profits between £12,570 and £50,270
- Employees’ National Insurance rates reduced from 12% to 10% on earnings between £12,570 and £50,270. Brought in with effect from 06 January 2024.
- Individuals receiving only PAYE income over £150,000 will no longer have to file Tax Returns from 2024/25
State support
- State pension to increase under the Triple Lock by 8.5% in April 2024
- Universal credit to increase by 6.7% in April 2024
- Local Housing Allowance increase to 30% of local rents
- Reform benefits system to assess ‘work capability’, and remove benefits entirely where claimants refuse employment
Businesses
- Living wage increasing 9.8% to £11.44 and will apply to ages 21 and 22 as well, not just those over 23.
- Apprentices will see a 21% increase, up from £5.28 to £6.40
- Alcohol duty frozen until 01 August 2024
- Committing £50 million to two year apprenticeship pilot courses in engineering and other key growth sectors
Business taxes
- Full expensing made permanent – this allows 100% of qualifying machinery and equipment to be deducted in year of acquisition. This only really affects businesses spending more than £1 million on qualifying purchases.
- Business rates relief at 75% continues for Leisure, Hospitality and Retail businesses into 2024/25
- Business Rates small business multiplier frozen for one further year
- R&D tax schemes for large entities and SMEs are merged from 01 April 2024. Various changes to the schemes see the rate for SMEs decrease, though subsidised expenditure will no longer be restricted.
Infrastructure
- Planning system reforms on ‘key commercial projects will accelerate decision dates or refund planning fees where guaranteed dates are not met.
- Changes to remove planning constraints on certain low-carbon infrastructure
- Fiscal incentives at freeport sites extended from five years to ten years
If you have any queries following this week’s announcement, please do not hesitate to contact us.
