Autumn Statement Key Highlights

The Chancellor, Jeremy Hunt, delivered his Autumn Statement this lunchtime (Wednesday 22 November), proclaiming the “biggest business tax cut in modern British history”.

But this wasn’t the only big-hitter. Hot on the heels of “growth measures to back British business”, Jeremy Hunt confirmed the speculation of a National Insurance cut.

With 110 growth measures, our TC Group team have summarised the key headlines, focusing on the points that may impact you, your business and your employees.

Trevor Shaw, Partner
Nigel Syson, Associate Director – Tax
Debbie Ince, Head of Tax (TC SEM)
Vic Ulfik, Director – Head of Innovation Tax Reliefs

National Insurance cuts for employees

Perhaps the biggest news for many, 27 million people in fact, from 6 January 2024 the rate of National Insurance paid by employees will reduce from 12% to 10%.

For the average salary of £35,000 per annum, this means an extra £448 per year in your pocket.

National insurance cut for Self-Employed

The Chancellor announced that Class 2 National Insurance – a weekly payment of £3.45 – will be abolished from 6 April 2024 for the self-employed earning over £12,570.

He also announced the Class 4 NI Contribution – a tax on profits earned – will also be reduced from 9% to 8%.

Together, a saving of £403 (based on current rates) for a self-employed person on £35,000.

Fully expensing on IT, plant and machinery

Where businesses invest in IT, plant and machinery, for every £1 spent the corporation tax liability is reduced by 25p. Therefore, invest a million pounds in qualifying spend, you’ll receive £250,000 off your tax bill.

The Fully Expensing relief was due to end on 31 March 2026, but Jeremy Hunt confirmed today that it’ll become permanent. This will provide some certainty for businesses, but the prospect of a general election on the horizon may create more uncertainty.

R&D Tax Relief schemes to merge

Following a consultation earlier this year, the current R&D Expenditure Credit (RDEC) and SME schemes will be merged from April 2024 onwards. Historically the SME regime has been more generous and forms the bulk of the claims made by our owner-managed client base.

HMRC had previously said it would delay the decision until April 2024.

This should simplify the R&D tax relief scheme system.

Key points:

The government proposed adopting a position on subcontracting where the decision maker is allowed to claim for contracted out R&D.
Where a company with a valid R&D project contracts a third party to undertake some of the (qualifying) work connected with their R&D project, the company may claim the relevant (qualifying) costs of that contract. The company contracted to do that work may not claim for R&D activities which delivers the project outcome for another company’s project.
The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%.
The intensity threshold in the R&D intensives scheme will be reduced from 40% to 30% for accounting periods that starts on or after 1 April 2024.
A one year grace period will also be introduced, providing certainty for companies who dip under the 30% threshold that they will continue to receive relief for one year.

Together, these changes will provide an additional £280 million relief per year by 2028-29 to help drive innovation in the UK.

However, details of the combined schemes and the impact on R&D claims are yet to be revealed, when they are, we will publish these with worked examples on the how it will impact on R&D claims.

Pensions

The Chancellor has called for evidence on giving employees the legal right to require their employer to make pension contributions to the employee’s existing pension scheme, rather than the employers own scheme.

However, he confirmed the Government’s commitment to the triple lock on pensions with the State Pension, increasing by 8.5% which equates to £221.20 per week.

Business rates support

A business rates support package will continue over the next 5 years to help high streets and hospitality. This includes a 75% business rate discount for Retail, Hospitality and Leisure, together with a freeze to the small business multiplier too.

National living wage increases

From 6 April 2024 the national living wage will be increased to £11.44 per hour, an increase of £1.02. For the first time, this will also apply to 21 and 22 year olds

The national minimum wage will also increase to £8.60 for 18 to 20 years, and £6.40 for 16 to 17 years olds and apprentices.

Other duties

The Chancellor has announced that duties on all tobacco products will increase by RPI +2%, but to reduce the gap with cigarette duty, the rate on hand-rolling tobacco will increase by RPI + 12% this year.

However, the alcohol duty will be frozen until 1 August 2024, which together with the extension of the business rates relief for the hospitality sector, will support public houses.

The government are to extend the scope of the current VAT zero rate relief on women’s sanitary products to include reusable period underwear from 1 January 2024.

What about VAT?

Energy-saving materials – the Government’s looking to expand the scope of the VAT relief for the installation of energy-saving materials. This is to include other technologies such as water source heat pumps, as well as bringing RCP (relevant charitable purpose) buildings into the relief. HMRC are expected to release details shortly, with implementation expected in February 2024.

Private Hire Vehicles – following the recent Supreme Court ruling on Uber drivers and their employment status, HMRC will be launching a consultation next year on the VAT position.

VAT Retail Export Scheme – this scheme was removed following Brexit and hopes of it being reinstated during Liz Truss’ spell as Prime Minister were soon after dashed by Jeremy Hunt. However, this proves to be still a popular matter, and the government is continuing to review its position.