Industry News - 28th November 2023
The Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement to the House of Commons on 22 November 2023, against a backdrop of continuing economic challenges.
The Chancellor, however, was able to report that inflation has fallen to 4.6% in October, down from a peak of over 11% last year and the OBR (Office for Budget Responsibility) has also forecast inflation to continue to fall gradually.
The following summary of the measures announced in the Autumn Statement is split into two sections:
1. Taxation changes
2. Other announcements.
The Chancellor unveiled a number of changes to the National Insurance contributions (NICs) rates.
The major announcement saw a reduction in the main rate of Employee National Insurance. This will see Class 1 NICs reduced by 2% from 12% to 10%. This measure is due to come into effect before the start of the next tax year, effectively from 6 January 2024. The Chancellor claims that this change will save the average worker around £450 a year.
Jeremy Hunt also announced the removal of Class 2 NICs for the self-employed. This means that self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs from 6 April 2024. Class 2 NICs are currently paid by the self-employed who make profits above £12,570, in order to qualify for benefits such as the state pension. This change effectively abolishes Class 2 NICs for some two million self-employed people. The self-employed benefitting from this change will continue to receive access to contributory benefits including the State Pension. Those currently paying Class 2 NICs voluntarily will still be able to do so at the same rate.
In addition, a change was introduced to Class 4 NICs, the main rate of self-employed National Insurance. From April 2024, the rate will be cut by 1%, from 9% to 8%, for all earnings between £12,570 and £50,270.
Business Tax – full expensing
The most significant announcement in the Autumn Statement affecting business investment related to ‘full expensing’. Full expensing was introduced at Spring Budget 2023 and offers companies the ability to write-off the purchase of qualifying plant and machinery.
The relief was initially introduced for a 3-year period from 1 April 2023 until 31 March 2026. Last week, the Chancellor announced that the government will now make full expensing permanent. According to the Statement, this means that the UK will now have one of the most generous capital allowances regimes in the world.
Business Tax – R&D
The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, in order to simplify the system and boost innovation in the UK.
The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.
National Living Wage increases
The Chancellor confirmed the following changes that will apply from 1 April 2024 for the National Living Wage (NLW). For the first time, eligibility for the NLW will be extended to 21 year olds and the pay increase will see the NLW rate rise to £11.44 per hour.
The National Minimum Wage (NMW) rates are also to be increased from the same date,1 April 2024.
The new rates will be:
• 18 to 20 year old rate will be £8.60 per hour
• 16 to 17 year old rate will be £6.40 per hour
• The apprentice rate will also be £6.40 per hour.
Making Tax Digital
The government will introduce a package of changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA). This will benefit 1.7 million businesses and landlords set to be mandated to use MTD.
It was announced last year that the introduction of MTD had been delayed until April 2026. From that date, those with annual income over £50,000 will be mandated to join the scheme, followed by those with income over £30,000 from April 2027. The government has said they will keep under review the decision on whether MTD for ITSA will be extended to businesses and landlords with income below £30,000.
A business rates support package worth £4.3 billion over the next 5 years was launched. This included a rollover of 75% Retail, Hospitality and Leisure relief for 230,000 properties and a freeze to the small business multiplier, which will protect around 90% of ratepayers for a fourth consecutive year.
Benefit payments will rise in line with the September Consumer Price Index (CPI) inflation – 6.7%. This means the government will raise benefits, including Universal Credit and other working age benefits by 6.7% from April 2024.
The new full State Pension will increase by 8.5%, in line with average earnings growth, from £203.85 per week in 2023-24 to £221.20 per week in 2024-25. The basic State Pension and Pension Credit standard minimum guarantee will also increase by the same percentage.
Please contact us if you would like to discuss how these changes may affect your business or tax affairs in the coming months.