Chancellor Jeremy Hunt delivered his Autumn Statement on Wednesday 22 November 2023, announcing a variety of measures, including tax cuts and planning reforms, to get the UK's economy growing again.
SoGlos spoke to leading accountancy firm, Hazlewoods, to unpack exactly what the new measures mean — with its head of tax, Nick Haines, sharing seven key takeaways for individuals and businesses in Gloucestershire.
The economy is set to grow
The Office for Budget Responsibility (OBR) is predicting that the UK economy is set to grow in each of the next five years, at a rate of between 0.6 and two per cent — but the growth figures have been downgraded from the previous forecast in the Spring Budget.
Inflation is also coming down, having dropped from 11 per cent at its peak to 4.6 per cent in October 2023. It's predicted to fall again to 2.8 per cent by the end of 2024 and hit the government's overall target of two per cent by 2025 — but this is happening slower than was predicted in spring.
National Insurance contributions are coming down for employees
In a tax cut for employees across the country, Class 1 National Insurance contributions are being reduced from 12 per cent to 10 per cent for those earning between £12,570 and £50,270 per year, which Hunt says will save an employee earning £35,000 around £450 per year, with higher rate taxpayers saving £750 a year. The tax cut comes into effect from Saturday 6 January 2024, so payroll processors and software houses only have a few weeks to get ready.
Haines said: 'Whilst welcome, it should not be forgotten that the freezing of the personal allowance and basic rate bands, coupled with high wage inflation, has resulted in people paying much higher tax than they would have paid, had those bands increased in line with inflation.'
National Insurance is also coming down for the self-employed
Class 2 National Insurance contributions — which self-employed workers earning profits over £12,570 currently pay at a weekly rate of £3.45 — are being scrapped altogether, although individuals who are above the small profits threshold of £6,725 per annum can still get a qualifying year for state benefits. Those that don't meet the small profits threshold can voluntarily pay Class 2 National Insurance contributions to obtain a credit for the year to access benefits including the state pension.
The chancellor also announced cuts to Class 4 National Insurance contributions, too. Currently, self-employed people pay Class 4 NICs at a rate of nine per cent for profits above £12,570, with that rate dropping to eight per cent from April 2024, providing a maximum annual saving of £377.
'Full expensing' is being made permanent
The government's 'full expensing' scheme, which allows companies to claim 100 per cent in-year relief on capital expenditure on brand-new moveable plant and machinery, is being made a permanent fixture. Originally, the scheme was meant to come to an end in March 2026. Hunt predicts that the move will increase company investment by £14 billion by the end of 2028.
However, it's likely that only the biggest companies will benefit, as 99 per cent of businesses fall within the £1 million Annual Investment Allowance already — and the scheme isn't available to unincorporated businesses.
Business rates discounts are being extended
The chancellor announced that the 75 per cent discount on business rates for eligible retail, hospitality and leisure properties in England is being extended for another 12 months, until Monday 31 March 2025.
He is also freezing the small business multiplier at 49.9 pence for a further 12 months from Monday 1 April 2024; but increasing the standard rate, in line with CPI inflation, from 51.2 pence to 54.6 pence — meaning many businesses will face rates increases for the first time in four years.
Research and development tax incentives are being merged
The chancellor confirmed that two research and development (R&D) tax incentive schemes are being merged into one single scheme for all companies from 2024. The new scheme will be similar to the current R&D Expenditure Credits scheme, but will apply to accounting periods on or after Monday 1 April 2024, rather than expenditure incurred on or after that date.
Businesses will now qualify as an 'R&D intensive company' and benefit from more beneficial rates on tax incentives, if their R&D expenditure is at least 30 per cent of its total expenditure — this was previously 40 per cent. Loss-making companies will also be subject to what the government is calling a 'notional tax' on the 20 per cent R&D credit at a tax rate of 19 per cent, rather than the standard 25 per cent, so the net credit will be 16.2 pence for evert £1 spent on R&D expenditure.
More control over pension pots for employees
Employees joining a new company will be able to request that their pension payments go into their existing personal pension scheme, rather than their employer's company scheme, in order to avoid 'small-pot' pensions — with Haines saying that while the move is welcome for employees, it's likely to prove an 'admin headache' for those working in payroll services and could 'prove unwieldy over time, having to administer pension payments into a number of different schemes'.
Hunt also confirmed he would honour the triple lock; and that the full state pension would increase by 8.5 per cent from April 2024, rising to £221.20 per week.
For specialist tax advice from Hazlewoods, email email@example.com or call (01242) 680000.