Autumn Statement 2023- Initial Thoughts

As usual, speculation was rife in advance of today’s Autumn statement. Theoretically this is an opportunity to update us on the state of the economy rather than to make dramatic tax changes. However, as this parliament will end no later than December 2024, it is no surprise that the government is seeking to win approval (and votes).

Jeremy Hunt started by lowering expectations, making a joke that implied there was not going to be any good news in the statement. He stressed that he was seeking long term stability and growth rather than short term headlines.

Small businesses

The chancellor said that small and medium sized enterprises are the engines of the economy and announced a series of measures which he said would help them thrive.

He pointed to business rates, describing it as a tax that has to be paid regardless of the level of business.  Accordingly, the small business rates multiplier has been frozen for another year, although the standard rate multiplier will be increased in line with CPI inflation. The 75% reduction offered to the retail, hospitality and leisure sectors has also been extended for a year.

For the self-employed, the weekly flat rate class 2 national insurance charge of £3.45 will be abolished and the main rate of class 4 NIC payable on profits between £12,570 and £50,270 will be cut from 9% to 8%.  This will save a self-employed person on £28,200, £350 in 2024-5.

Larger businesses

Businesses or groups of companies which have routinely spent more than the annual investment allowance on plant and machinery will benefit most from the decision to make permanent the 100% First Year Allowance for assets that go into the main pool and 50% FYA for assets that go into the special rate pool.  It is worth remembering however that cars, second-hand assets and assets for lease are all excluded from this full expensing.

Employment

On offer here was a combination of stick and carrot. Getting people into employment is, according to the chancellor the key to growth in the economy.  The carrot is an increase in the national living wage to £11.44 per hour from April 2024 (an increase of 9.8%) and a reduction of 2% in the main rate of employee NICs from 12% down to 10% in January.  The stick comes in the form of additional measures in the Universal credit sanctions regime.

The chancellor was also keen to remind us of the roll out of the free childcare package available, assisting parents wishing to return to work. He referred to 30 hours per week for 38 weeks of the year for children between 9 months old and school age.  However, this level of support is not due to be rolled out until September 2025.

For employers however, there was no reduction in the rate of employer’s NIC and of course the increase in the national living wage could create difficulties for smaller businesses.

R&D tax relief

The tinkering with R&D tax relief continues with the announcement that the existing small business enhanced relief scheme and the large company “above the line” RDEC scheme are to be merged for expenditure incurred in accounting periods beginning on or after 1 April 2024.

Further detail on all measures is likely to be become available over the coming weeks. Our full budget summary will be available tomorrow.