The Chancellor, Jeremy Hunt, announced his Autumn Statement on Wednesday 22 November.
In his opening statement, Hunt made it clear his plan centres around three priorities – reduce debt, cut taxes, and reward work.
With The Office for Budget Responsibility stating that the economy will grow each year for the next 5 years and will reduce debt as a proportion of GDP from 2027-2028 lessening the burden on future generations, the Government’s attention turns to making long-term decisions that are necessary to grow the economy.
To help you understand the changes a little better, we’ve pulled together our DJH Mitten Clarke Autumn Statement Report which looks at The Chancellor’s announcements in detail but here are some of the key highlights…
Tax Cuts
Despite long speculation, it will come as a shock for most people, it was confirmed that there will be no cuts at the moment to Inheritance Tax, (also known as ‘The UKs most hated tax’).
However, Hunt declared he was about to set out ‘The biggest amount of tax cuts since the 80’s,’ so let’s unpack them and see…
National Insurance
To support the self-employed, National Insurance Contributions will be cut. A £350 a year tax cut will be put in place for the average self-employed person earning £28,200.
From April 2024, people will no longer have to pay Class 2 National Insurance (which allows the self-employed to qualify for benefits like the State Pension), and Class 4 National Insurance (based on the level of your self-employed profits) will be cut from 9% to 8%.
Employee National Insurance
Stating that ‘Reducing a tax on work means more people in work,’ Hunt announced that from January 2024, the Employee National Insurance Contributions will drop from 12% to 10%. This means a £450 tax cut for the average worker earning £35,400. The cut comes to help people keep more earnings in the pockets of workers at a time when it’s most needed.
Positive Increases
We’ve highlighted the cuts in The Chancellor’s plan but there are some increases that will benefit the majority people:
National Living Wage
Confirmed prior to the Autumn Statement but highlighted again in his speech, Hunt declared there will be an increase to the living wage. It is set to rise from £10.42 per hour to £11.44 per hour from April 2024, and will also be extended to 21 and 22-year-olds for the first time. For businesses, this could mean increase costs and could squeeze some margins, especially for those in the hospitality sector.
State Pension
Following the rules of the triple lock – the system where the full basic state pension rises each year in line with earning growth figures between May to July the previous year, Consumer Price Index (CPI) inflation from the previous September, or 2.5%, pensioners will be getting another boost to their state pension next year. Both The Pensions Triple Lock and Pension Credit will be protected and rise to 8.5% in April 2024, supporting pensioners across the UK with the cost-of-living crisis.
Support for Savers
Allowing pension savers to benefit from innovative UK industries, £250 million will be invested to enable UK pension funds to back the UK’s most innovative and science technology companies.
Options will also be explored for a retail offer of NatWest Group shares, as part of plans to reduce the Government’s stake, to help promote a savings and investments culture.
Levelling up the Economy
Investing in future Industries
A £150 million Investment Opportunity Fund has been announced, as well as an Investment Zone Programme Extension and freeport tax relief extensions. The 3 new Investment Zones will be across in England in Greater Manchester, West Midlands and East Midlands.
This comes as a pledge to unlock business investment and boosting jobs across the UK.
Package of Investment
Supporting growth and boosting the economy, a package has been set out which is expected to bring in £20bn annually of investment in the UK economy.
Backing The High Street
To help protect the heart of many communities, the 75% business rates relief for retail, hospitality and leisure has been extended until 2025.
The small business multiplier has been frozen, to help protect over 1 million ratepayers.
Boost for the Tech and Creative Sector
With the UK’s AI industry thriving – employing over 50,000 people and contributing £3.7 billion to the economy last year, the Government have committed a further £500m to help fund the next generation of supercomputers and AI innovation.
To help boost global competitiveness, the creative sector will be provided with additional tax relief for visual effects expenditure, to help attract more investment into the UK.
Changes to Business Tax
Investing in the UK just got even more attractive for businesses. The government has announced that the Business Tax break known as ‘Full Capital Expensing’ has been made permanent. This investment allowance effectively reduces the Corporation Tax liabilities for businesses that invest in IT, machinery, and equipment.
Under this scheme, for every £1 that a business invests in these essential assets, they can claim back 25p in Corporation Tax. This means that businesses can deduct the costs of these items from their profits, resulting in a significant reduction in the amount of tax they need to pay.
Initially introduced in April 2023 following the Spring Budget, this tax break was set to end in 2026. However, it has now been made a permanent fixture, providing long-term certainty for businesses and encouraging further investments.
According to the latest Simply Business SME Insights Report, high taxes have been a major concern for 31% of SMEs in 2023. With the extension of this generous tax relief, businesses can breathe a sigh of relief as they navigate the challenges of being a business owner.
Simplified R&D Relief
As anticipated and following a review of the UK’s R&D tax reliefs landscape, plans were announced to replace the existing SME and RDEC regimes with one simpler scheme from 01 April 2024.
The new 20% (gross) relief will simplify the operation of the R&D tax reliefs for businesses, combining ‘the best parts of both reliefs under a common set of rules’ (such as providing much needed clarity on contracted out R&D), and providing ‘a more visible above the line credit’ – all with the aim of ‘providing greater support for UK companies to drive innovation’.
Additionally, the expenditure threshold of the SME Intensive Scheme, for R&D intensive loss-making SMEs, will be increased from 40%, meaning that from 01 April 2024 businesses that incur 30% or more of their costs on R&D will benefit from an enhanced level of support.
Along with the recently launched Additional Information Form for the submission of all R&D claims, the Government also announced plans to publish a focused ‘compliance action plan’ to help reduce the levels of error across the reliefs.
Boosting Opportunities for UK Manufacturing
£4.5 billion has been given to the UK manufacturing sector, to help boost jobs across the UK, safeguarding energy security and building health resilience and preparing for a green future.
This will help boost opportunities in Aerospace, Zero Emission Vehicles, Life Sciences, Carbon Capture, Utilisation & Storage, Hydrogen, Nuclear and Offshore Wind.
After consideration, it was also confirmed that there will not be an increase to alcohol duty until 2024, and Road Tax for HGVs has been frozen, to help protect vital journeys.
Take a look at our Autumn Statement report
There was a lot to digest, so we’ve put together our Autumn Statement 2023 Report, with details of the current economic background, all the measures announced by The Chancellor and what they could mean for you.
What do our experts think?
