Jeremy Hunt delivered his Autumn Statement as Chancellor on Wednesday 22nd November.
In this article, we set out the key announcements that The Chancellor unveiled in his Autumn Statement on the 22nd of November. Jeremy Hunt mentioned that he was bringing forward 110 growth measures in this Autumn Statement, but we wanted to really distil this down into the ones that will have a significant impact on our clients.
Economy/public finances It was good to hear that the economy has grown, despite earlier forecasts that there might be a recession.
- The UK's economy has grown by 1.8% since before the pandemic started, whereas the previous estimate was a 0.2% contraction. The economy has also grown steadily in the first 2 quarters of this year and again this is in excess of previous estimates.
- The Chancellor also forecasted further growth over the next 2 years, and it was said that the economy has “turned a corner”. This is providing some headroom for tax cuts.
Business tax Firstly, the full expensing capital allowance has now been made permanent.
- Permanent full expensing will create the certainty that businesses need to confidently invest for less. A company can now permanently claim 100% capital allowances on qualifying plant and machinery investments, meaning that for every £100,000 invested its taxes are cut by up to £25,000. The government has been exploring the case for expanding the scope of full expensing to include assets for leasing, which could be beneficial for those in the hire sector if it goes ahead.
- Small business rates multiplier frozen. Freezing the business rates multiplier will keep business rates low for many small businesses.
- It was widely reported that we could expect the chancellor to announce changes in inheritance tax and stamp duty land tax. However, notably, neither were mentioned in the statement.
- There were further reforms announced regarding both R&D, that is Research and Development tax credits, and CIS (the Construction Industry Scheme) gross payment status, some of which at least will apparently take effect from April 2024. However, no detail has been released as yet, which is surprising given the short timescales. We will keep everyone informed of these as they are announced.
Personal tax self-employedThe Chancellor first addressed the self-employed. This would include any sole traders, or partners in a partnership or LLP.
- The Chancellor decided to abolish Class 2 National Insurance Contributions for the self-employed from 6th April 2024. Currently, any self-employed individual with profits above £12,570 has to pay a weekly flat rate of Class 2 NICs, with the rate having been set to increase to £3.70 per week in line with inflation. For the majority of self-employed, this rate has now been removed, whilst ensuring that they will retain their access to benefits such as State Pension. This is an effective saving of £192 per annum for every self-employed individual. Further reform is expected to be set out next year, particularly focused on the lower-paid self-employed.
- Again, for the self-employed sole traders or partners, Jeremy Hunt also decided to reduce the 9% main rate of Class 4 National Insurance Contributions, down to 8% from April 2024. This is the rate of NICs that the self-employed pay on their profits between £50,270 and £12,570. The 2% rate above £50,270 has not been changed.
It’s also worth making the point that there were no changes to the dividend tax rates.
Personal tax employeesThen turning to those that are employed, the first thing to say is that the Income Tax thresholds and rates remain unchanged. There were rumours prior to the Autumn Statement that the Chancellor could be considering reducing the 20% tax rate down to 19%, however, this did not materialise.
- He did however give a substantial reduction in the 12% main rate of Employee Class 1 NICs, a decrease of 2%, taking it down to 10%. Similarly, to the Class 4 NICs mentioned previously, this is the rate that is paid by employees on income between £50,270 and £12,570. So in real terms, this means that every employee who earns in excess of £50,270 will save £754 per annum - £62 per month. Similarly, to the Class 4 NICs, no changes were made to the 2% rate that is paid above £50,270.
Lower income individualsThe Chancellor particularly addressed lower income individuals with 3 further measures:
- Firstly, he increased the National Living Wage by 9.8% up to £11.44 per hour from 1st April 2024. 9.8% is substantial for lower-paid employees. Based on a 40-hour working week, the current National Living Wage equates to an annual salary of just under £22,000 per annum - with the increase proposed, this will now go up to just under £24,000 per annum. An important point to note is that 21- and 22-year-old’s are now included at the same rate - so employers need to ensure that they are remaining compliant with the National Living Wage rates. It’s important to note that anyone contracted for a 45-hour working week, will require a salary of nearly £27,000 per annum.
- Secondly, the Chancellor announced an increase in the State Pension rate of 8.5% from April 2024, which again is a significant increase to some of the lowest-income individuals in the country.
- Thirdly, the rate of working-age benefits is to be increased by 6.7% from next year for those claiming them.
Good news on the economy and the extension of the current favourable full expensing capital allowances provision. Overall, it was clear that the primary announcements were centred around reducing the tax burden for lower-paid individuals, rather than any significant changes to business tax.
A takeaway for all employers is to check that you are complying with the new National Living Wage, particularly remember that the minimum of almost £24,000 for a 40-hour week. It is worth noting that the cost of employing staff has not changed. The National Insurance reduction is for employees only, the employer pays the same 13.8% national insurance on the employee’s salary.
You can also watch our short summary video for a quick round up on some of the key announcements.
Tax affairs are complicated and we would always advise you to speak with your advisers before making any changes. For more information on how we can help you and your business please contact us at email@example.com or call 02476673160.