Autumn Statement Update
The Autumn Statement was delivered by Chancellor Jeremy Hunt, we give our summary and takeaways with a particular eye to small business.
for business
The Economy
The fall in inflation from 11.1% to 4.6% is obviously very welcome although our impression from speaking to clients is that the cost of living crisis has been a slow burn so it will probably also take time for us to feel this benefit.
Growth remains sluggish, pencilled in at 0.6% for this year and 0.7% next.
National Living Wage
This was probably the most significant announcement for small businesses. From April 2024 following advice from the Living Wage Foundation:
21-22 rate will be abolished
The 21+ rate will be £11.44 up from £10.42 for +23 yr olds and £10.18 for 21-22 yr olds
18-20 yr old rate increases from £7.79 to £8.60
Under 18 yr old rate increases from £5.28 to £6.40
Apprentice rate rises from £5.28 to £6.40
Hospitality, Retail and Leisure Business Rates Discount
The 75% discount for these sectors is being extended until 2025.
Accounting Streamlining
The Chancellor is trying to streamline accounts processes with a view to Making Tax Digital (MTD) implementation. Above a threshold sole traders are currently required to use the accrual method of preparing their figures (based on invoices sent and bills received). From Apr 2024 they will all be able to use the cash basis (money in and out of the bank), in fact this will be the default system.
MTD is being scrapped for sole traders and landlords with income under £30k per year.
R&D Tax Credits
The government is pursuing its project to streamline R&D tax credits and a full review is underway. This shows the government is still committed and sees the scheme as an important way to boost productivity. As ever, working with reputable consultants remains important to get the details correct.
Fully Expensed Plant and Machinery
A lot was made of this by the Chancellor but because small businesses rarely if ever exceed the thresholds for Capital Allowances, it is essentially irrelevant for small business.
Audio-Visual Creative Tax Reliefs
There are new reliefs for the film, TV and gaming creative industries.
for the individual
National Insurance
The most significant announcements were around National Insurance.
Class 1 employee national insurance contributions (i.e. the national insurance rate that employees pay) will be cut from 12% to 10% from January 6th 2024. This means the average worker on £35,400 will receive a tax cut of over £450 per year.
Class 2 self-employed national insurance contributions - the NIC rate that self-employed people pay is being abolished.
Class 4 self-employed national insurance contributions - the NIC rate that self-employed people pay on profits are reducing from 9% to 8% from 6th April 2024. The average self employed person earning £28,200 will save about £350 per year in the new tax year.
Income Tax Bands
These remain frozen until 2027. The so-called Fiscal Drag of unchanged income tax thresholds is set to continue therefore.
Dividends
There was no change to the previously announced reduction in Dividend allowance. From April 2024 the dividend allowance will reduce from £1k to £500. Dividend tax rates however remain the same at 8.75% Basic Rate and 33.75% Higher Rate.
Pension Allowance Increase
The lifetime allowance will be abolished and a rise in the Annual Allowance was announced from £40k to £60k.
AND FINALLY
More Money for HMRC
The government is committed to plugging the tax gap (between its estimate of the tax that it should be collecting and the tax actually collected) by providing HMRC with more resources. We hope some filters through to improving helplines and administration.
