Today, Chancellor Jeremy Hunt delivered the UK Autumn Statement in a period of high inflation, and the latest Office for Budget Responsibility (OBR) forecast showing sluggish growth.
With the next election looming, Mr Hunt made some key announcements today whilst trying to deliver on his promise to back British business, boost business investment, reduce debt, cut taxes and reward work.
Below is our summary of the key points from the Chancellor’s announcements in the Autumn Statement 2023 which will impact UK business owners, contractors, self-employed and landlords.
Capital allowances and full expensing
Today’s expected announcement of a permanent extension of ‘full expensing’ was welcome news to business owners. Under current guidance, full expensing was due to end on 1st April 2026.
Full expensing allows businesses to deduct the 100% cost of qualifying plant and machinery from their profits immediately, with no expenditure limit.
Additionally, the 50% first year allowance for special rate assets (including long life assets) will also become permanent with it.
The extension will provide savings on Corporation tax and improve cashflow for businesses, and give them the confidence to make long term UK investments beyond 2026.
R&D tax relief
The chancellor has announced the creation of a new simplified R&D tax relief combining existing R&D expenditure credits and SME schemes from April 2024 and a reduction in the rate at which loss-making companies are taxed within the merged scheme from 25% to 19%. There will also be a lowering of the threshold for the additional support for R&D intensive loss-making SMEs that was announced in the Spring to 30%.
The government will also introduce legislation in Autumn Finance Bill 2023 to remove the use of nominations for R&D tax credit payments (subject to limited exceptions). This will stop payments being made to third parties, with payments now going directly to claimants. The government will also legislate to prevent any new assignment (whether equitable or statutory) of R&D tax credits. HMRC will withhold payment until it is able to make payment directly to the claimant company. The change on nominations will take effect for all claims to payable R&D tax credits made on or after 1 April 2024. The restriction on new assignments will apply in relation to assignments made on or after 22 November 2023.
Further, the intensity threshold announced for R&D intensive loss-making SMEs will be reduced from 40% to 30%. The reduced threshold will apply from 1 April 2024.
National insurance for the self-employed?
Today saw a plethora of changes to National Insurance - here are the main points:
Class 2 national insurance contributions are being abolished. From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NIC, but will continue to receive access to contributory benefits including the state pension. This was one of the suggestions from the Office of Simplified Tax, and great to see the government has acted on it.
Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the state pension through a National Insurance credit without paying National Insurance contributions as they do currently.
Those with profits under £6,725 who choose to pay Class 2 voluntarily to get access to contributory benefits including the state pension will continue to be able to do so.
There will also be a 1% cut to 8% (from the current 9%) in class 4 contributions, delivering a further £160 saving for an average self-employed person on £28,200 of income.
National insurance for employees
A surprise announcement that from 6th January 2024 (from the usual 6 April date) there will be a cut in the main 12% rate of employee national insurance. The rate will be cut to 10% from January next year.
National Living Wage
Prior to the Autumn Statement, The Chancellor announced an increase to the National Living Wage. This increase takes effect from April next year. The increase of the National Living Wage to £11.44 per hour will apply to those workers over the age of 23; but for the first time, will also apply to 21 and 22 year olds. This effectively gives a full-time worker over the age of 23 a rise of £1,800 a year and a 22 year old would see a rise of £2,300 a year.
18-20 year olds will also see an increase from £7.49 an hour to £8.60 per hour and apprentices wages rising from £5.28 per hour to £6.40 per hour.
Whilst this is great news for individuals, it may well have a significant impact for small business owners who will need to factor in these increased costs from April 2024.
Housing and landlords
Good news for the housing market with the government focusing on the building of more homes.
Housing measures announced included:
- £110m to deliver high-quality nutrient mitigation schemes to unlock 40,000 new homes.
- £32m new homes to “bust the planning backlog” and develop housing quarters in Cambridge, London and Leeds.
- A £3bn extension to the affordable homes guarantee scheme.
- £450m to the local authority housing fund to deliver 2,400 new homes.
- An increase the local housing allowance rate to cover the bottom 30 per cent of local rents This will give 1.6 million households an average of £800 of support next year.
Benefits & state pensions
The Chancellor announced a number of measures targeted at benefits claimants, these included:
Increase Universal Credit and other benefits for next April by 6.7%, in line with September’s inflation figures.
Today’s announcements on state pensions mean the government’s plans to stand by the state pension triple lock will continue. From April 2024, an increase to the full new state pension of 8.5% to £221.20 per week.
Skills: £50m of funding over the next few years to pilot ways to increase the number of apprentices in engineering and other key growth sectors.
Business rates: Business rate relief extended. A freeze in the small business multiplier for a further year. Extension of the 75% discount on business rates up to £110,000 discount for retail, hospitality & leisure businesses for another year.
Infrastructure projects and business planning applications: Businesses should see an improvement in turnaround times for major business planning applications. The announcement today will allow local authorities to recover the full costs of major business planning applications in return for being required to be guaranteed faster timelines.
Late payments 30-day payment terms will automatically apply through the sub contract supply chain. Any company bidding for large government contracts should demonstrate they pay their own invoices within an average of 55 days which will reduce progressively to 30 days.
Innovation: Jeremy Hunt is focused on turning the UK into an AI Powerhouse announcing investment of a further £500m over the next two years, to fund further innovation centres. £4.5bn support over the five years to 2030 to attract investment in strategic manufacturing sectors including the automotive sector, aerospace, life sciences, green industry accelerator.
Other changes to note not announced in todays speech
Off-payroll working (IR35)
The government will introduce legislation in Autumn Finance Bill 2023 to enable HMRC to reduce the PAYE liability of a deemed employer, where that engagement was incorrectly treated as self-employed for tax purposes. This would account for tax and National Insurance contributions already paid by a worker and their intermediary on payments received from an off-payroll working engagement. Secondary legislation will be laid in due course to set out how it will work. The changes will take effect from 6 April 2024.
A response to the consultation launched in April 2023 has also been published alongside the Statement.
Simplifying Making Tax Digital (MTD) for Income Tax Self-Assessment
As announced at Autumn Statement 2023, the government will make design changes to Making Tax Digital for Income Tax Self-Assessment, simplifying and improving the system for taxpayers and their representatives. The government will:
- simplify the requirements for all taxpayers providing quarterly updates and for taxpayers with more complex affairs, such as landlords with jointly owned property.
- remove the requirement to provide an End of Period Statement.
- exempt some taxpayers, including those without a National Insurance number, from MTD.
- enable taxpayers using MTD to be represented by more than one tax agent.
Draft regulations will be published for technical consultation later in 2023.
Clarity on deductibility of training costs for sole traders
HMRC will rewrite their guidance to offer more clarity to sole traders and self-employed people on the costs that can be deducted to compute taxable profits when spending on training or updating skills.
Extension of the SEIS and EIS scheme
The Autumn Finance 2023 will be legislated to to keep the current rules for the EIS and VCT in place for a longer time, until 6 April 2035 instead of 6 April 2025.
Consultation to begin on giving savers a legal right to require a new employer to pay pension contributions into their existing pension policy, if they choose, meaning people can move to having one pension pot for life. However, this will be more work and administration for employers if this comes into force.
Today’s Autumn Statement didn’t deliver on all the tax cuts and changes that we were hoping for. There were no income tax cuts, no changes to Capital Gains Tax or Inheritance tax cuts as many had hoped for and predicted.
There was still something for everyone to cheer about. Definitely the national insurance cuts for employees which commences in January (than the usual 6 April) will surely be making the headlines for sometime.
Will these measures truly support and kickstart the economy? Only time will tell!
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