Autumn Statement 2023

A key event in the political calendar, Chancellor Jeremy Hunt delivered the Autumn Statement in the House of Commons on Wednesday 22nd November 2023, providing an update on the Government spending plans based on the latest forecasts from the Office for Budget Responsibility (OBR).

There are several challenges facing the UK economy, and we were all hoping for some sign of relief for business owners around the country. In response to the latest announcement, we brought a few of our experts together to discuss what the changes mean for your business and personal finances.

If you would like further advice and guidance then get in touch, our team can help you navigate the changes and provide support when you need it.

Our overview Read detailed summary

Headlines

Class 2 National Insurance contributions (NICs) will be abolished and the main rate of Class 4 NICs will reduce from 9% to 8% from 6 April 2024.
Full Expensing for companies will be made permanent.
The R&D Expenditure Credit (RDEC) and SME schemes will be merged into a single scheme from 1 April 2024.
The qualifying period for Investment Zone and Freeport benefits will be doubled from five to ten years.
The main rate of Class 1 employee NICs will reduce from 12% to 10% from 6 January 2024.

Against a backdrop of reducing inflation and greater headroom for spending, the Chancellor announced several tax cuts and boosts to business in his ‘Autumn Statement for Growth’.

Self-employed individuals

Several measures were announced which benefit self-employed individuals.

The main rate of Class 4 NICs payable on self-employed profits between £12,570 and £50,270 will be reduced from 9% to 8% from 6 April 2024. In addition, Class 2 NICs payable by self-employed individuals with profits in excess of £12,570 will be abolished from 6 April 2024. Further reforms to Class 2 NIC are expected for those lower paid self-employed individuals who currently pay voluntary contributions.

Changes to self-employed NICs are expected to benefit around two million self-employed individuals and will result in an average self-employed person on £28,200 saving £350 in 2024/25.

The cash basis of accounting will become the default method for businesses from 2024/25. The turnover, interest and loss relief restrictions that currently apply to the cash basis will be removed.

Making Tax Digital (MTD) for Income Tax Self Assessment will be simplified. This is expected to benefit approximately 1.7 million businesses and landlords.

HMRC will also rewrite guidance around the tax deductibility of training costs for sole traders and the self-employed to provide more clarity to businesses on what costs are deductible.

Capital allowances

Full Expensing, whereby companies are eligible for a 100% First Year Allowance (FYA) on qualifying main pool assets and a 50% FYA on special rate pool assets, has been made permanent. This relief was previously expected to cease on 31 March 2026. This is expected to increase business investment by £3 billion per year according to the Office for Budget Responsibility (OBR).

A technical consultation will also be launched on wider changes to simplify the UK’s capital allowances legislation.

Research and Development (R&D) Relief

Following consultation, the R&D Expenditure Credit (RDEC) and SME schemes will be merged into a single scheme for expenditure incurred in accounting periods beginning on or after 1 April 2024. The rate under the merged scheme will be set at the current RDEC rate of 20%.

The notional tax rate applied to loss-making companies within the merged scheme will be reduced from 25% to 19%.

The threshold for a company to be considered R&D intensive (and therefore benefit from an enhanced rate of relief) will be reduced from 40% to 30% for accounting periods starting on or after 1 April 2024 which is expected to allow around 5,000 extra SMEs to benefit. A one-year grace period will also be introduced where companies dip under the 30% threshold.

The R&D changes will provide £280 million of additional relief per year by 2028/29 to help drive innovation in the UK.

Freeports and Investment Zones

The Investment Zones programme and Freeport tax reliefs will be extended from five to ten years.

Three more Investment Zones have been agreed in the West Midlands, East Midlands and Greater Manchester regions with a focus on advanced manufacturing. A second investment zone in Wales was also announced, which means 6 out of 13 Investment Zones have now been confirmed with the remainder expected to be announced by summer 2024.

The three new Investment Zones announced in England are expected to generate up to £3.5 billion in private investment and create over 65,000 jobs.

Personal taxation

The main rate of Class 1 employee NICs, which is payable on earnings between £12,570 and £50,270, will be cut from 12% to 10% from 6 January 2024. For the average worker earning £35,400 this should result in a tax cut for 2024/25 of over £450.

The Van Benefit Charge and the Car and Van Fuel Benefit Charges will be frozen at 2023/24 levels for 2024/25.

The government is making changes to simplify ISAs and provide more choice, including expanding the investment opportunities available in ISAs to include Long-Term Asset Funds and open-ended property funds with extended notice periods. The limits will be frozen at their current levels for 2024/25.

Individuals whose income is wholly taxed through Pay As You Earn will no longer need to file a Self Assessment tax return from 2024/25. This should remove the requirement for up to 338,000 taxpayers to submit a return.

Other Changes

The government will legislate to extend the Enterprise Investment Scheme and Venture Capital Trusts to 6 April 2035 (previously scheduled to end from 6 April 2025).
From 1 April 2024, the National Living Wage (NLW) will increase from £10.42 per hour to £11.44 (an increase of 9.8%). In addition, the age at which the NLW applies has been reduced from 23 to 21.
The National Minimum Wage for 18-20 year olds has increased from £7.49 to £8.60 and for 16-17 year olds and apprentices from £5.28 to £6.40.
A Back to Work Plan was announced including investment of over £2.5 billion, which will provide enhanced support through the individual’s work search journey, including mandatory work placements for the long-term unemployed.
In relation to business rates, the small business multiplier will be frozen for another year and the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be increased in line with September’s Consumer Prices Index. These measures will take effect from 1 April 2024 in England.
Tougher consequences will be introduced in the Autumn Finance Bill 2023 for promoters of tax avoidance schemes.
Various changes were announced to pension schemes, including a call for evidence on a lifetime provider model to allow individuals to have contributions paid into their existing pension scheme when they change employer. In addition, the government announced there will be a reduction in the authorised surplus repayment charge from 35% to 25% from 6 April 2024.

Haines Watts’ experts review the Autumn Statement

We sat down with our team of experts at Haines Watts to find out which announcements got them talking – and which weren’t as impressive.

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Autumn Statement 2023 - So far it's beige

Autumn Statement 2023 - our thoughts: Lawson, Martin and Moss share their initial reaction to this rather beige announcement (so far)...

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Autumn Statement 2023 - Key Points

Autumn Statement 2023 - our thoughts: Lawson, Martin and Moss share their initial reaction to the key points.

Our Partners React

Jonathan Scott, Tax Partner

The most generous capital allowances scheme in the world? Continuity and confidence for those who are planning to invest

We more than welcome the full expensing regime having been made permanent. The super deduction played a huge role in incentivising businesses to invest during times of economic uncertainty

The businesses we work with have been calling for some form of continuity and comfort when it comes to investing and maximising capital allowances. We’re looking forward to helping them to strategically plan for their long term future with this extra level of security.

With interest rates going down, planning applications being fast-tracked and the full expensing regime being here to stay, the Autumn Statement definitely bring opportunities for UK investment. No more so than for those businesses operating in the housing, infrastructure and construction sectors.

Laura Dickson, Private Client Associate Partner

It was surprising that Inheritance Tax (IHT) wasn’t addressed in today’s Autumn Statement, there has been so much anticipation surrounding the topic on the run up to today.

Overall, today’s announcements were positive for employees and those who are self-employed. As the Chancellor noted, the emphasis is on ‘rewarding effort and work’ and with a 2% reduction of employee NIC rates and a 1% decrease in Class 4 self-employment NIC rates, some generous savings could be made depending on profits over the next year. Depending on income levels, business owners may like to review their remuneration arrangement to see how the update affects them.

Self-employed people will be happy to see the abolishment of Class 2 NIC rates, providing a saving of almost £180 a year, not to mention the administrative burden of making sure this is paid every week (if you don’t pay this via Self-Assessment). This has been discussed for a few years now so great to see it finally happen.

With so much emphasis on getting people back into work and putting more money in worker’s pockets, those with rental income or investment portfolio’s might feel a little neglected in today’s announcements as there are no changes to income, dividend and capital gains tax rates. Again, those anticipating IHT changes today may also be disappointed that this was overlooked.

While the chancellor’s statement took a turn from what people expected, it could have been a lot worse. For some the Autumn Statement didn’t meet expectations, but there are savings to be made for employees and those who are self-employed.

Sara Andrews, Tax Partner

A merged R&D scheme coming in April 2024: Has the Autumn Statement created simplification and greater support or complication and confusion within a short period of time?

Merging the R&D schemes creates a significant tax simplification, including an aligned set of qualifying rules and a more visible above the line credit, which we see as a positive for claimants.

And as of April 2024 the rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%. This means that businesses will be able to retain more of the tax benefit.

However, the reduction in the R&D intensity threshold (for R&D intensive companies) after April 2024, could open the doors to more fraudulent activity. We could see companies changing their accounting policies to meet this 30% threshold, to benefit from a higher rate of relief. With the focus over the last 12 months having been on reducing fraud and risk, we can’t help but think that the reduction of the threshold moves the problem from tax to accounts, rather than addressing the core issue.

The changes also mean that we will be operating under multiple iterations of one tax relief, with a general election on the horizon and a new budget coming before the impact even hits.

Even for qualified advisors and tax specialists this is a confusing time to navigate the relief, especially in the short-to-medium term. So for the average business owner who is already juggling today’s climate with the running of their business, it’s making the process of claiming even more complex.

As we wait for more specific information and further clarity, we would advisor future and current claimants to speak to their advisors and make sure they are forward planning before April 2024.

David Fort, Managing Director

The headlines look great but it will be interesting to see how much credibility lies in the details to follow. We need to know how the announcements will impact businesses on the ground in the long term.

The greater Manchester Investment Zone was a welcome announcement, but again further detail is needed to really see what this will look like for the region and our businesses. With so much money wasted on the HS2 scheme, we need a long-term plan, not just a knee-jerk reaction in the run up to the election.

If we are to see real growth like the Government promises, businesses need to be supported. Already businesses are feeling the bite from higher taxes which were introduced a few years ago. Corporation tax still remains high, and even the permanent fully expensed regime which was announced today doesn’t have the same clout as the super deduction did. While an increase in the living wage is great for workers, it’s another hit for businesses who are already feeling the strain.

The take away for me is that headlines look great but the devil lies in the detail. We need a long-term strategy to support our businesses.

Ian Haynes, Tax Partner

Other than the Scotland related announcements, I think the rest of the statement was as expected, mainly due to the various leaks and pre statement reveals from the PM and others.

It’s good to see that all workers have been considered in the NIC cuts. Although clearly those who are employed will feel the benefit of the Class 1 NIC changes far sooner than those who are self-employed.

The announcement to make 100% expensing a permanent feature will no doubt be welcomed by businesses that can benefit from it and who are planning to invest. However, as with all significant capital expenditure, some thought is required prior to incurring these costs, and care is needed when looking at the tax implications not only on a purchase but also on a future sale.

There was also a throw away comment made quite early in the speech, suggesting that more funding will be given to HMRC to assist with the collection of tax debts. It’s not clear how this will be implemented but does it mean that HMRC will now begin to push harder to debts to be settled, as many are still carrying older debts in the wake of the pandemic?

Overall, no real surprise announcements, and perhaps a couple that were missing (no headline IHT changes) but as ever, the devil is in the detail of these 110 actions being put forward today!