On 22 November 2023, the chancellor, Jeremy Hunt, announced his autumn statement in which his priority is to ‘reward hard work’ through 110 ‘growth measures’. Here, our director, Steve Collings FCCA looks at some of the key points of the autumn statement and how it will affect individuals and businesses.
As expected, Jeremy Hunt opened the autumn statement with a couple of ‘jabs’ at the Labour party stating that the Tories will not give unions ‘unaffordable pay offers’, not ban new gas and oil licences or increase borrowing by some £28bn per year. He moved onto his autumn statement by confirming that it contains some 110 growth measures, a lot of which will be in technical details released through the Overview of tax legislation and rates (OOTLAR).
Autumn Statement Summary For Businesses
Economic growth
The chancellor announced that forecasts from the Office for Budget Responsibility (OBR) show the economy will grow by 0.6% this year and 0.7% in 2024. Today, it is 1.8% larger than it was before the COVID-19 pandemic according to the OBR.
When Hunt became chancellor, inflation was 11.1% but last week it was announced that it had fallen to 4.6%, an achievement through the government’s actions Hunt claimed in the autumn statement. The chancellor confirmed that the OBR forecasts headline inflation to fall to 2.8% by the end of 2024 before falling to the 2% target in 2025.
Some would argue that a fall in inflation is not achieved through an act of government because most economies have experienced the same thing, and the UK is still slightly above other nations. Some economists suggest that the reason inflation shot up is when the energy companies profiteered post-lockdowns when world demand started to go back up again. As many other goods and services use energy, the effect was a ‘double whammy’ because the cost of those goods and services increased. As markets have now settled, with prices falling year on year, inflation naturally falls (as it has done in other countries). So should Rishi Sunak and Jeremy Hunt be basking in all the glory due to a fall in inflation?
Business tax
In the spring Budget 2023, the chancellor announced a temporary full expensing regime for companies which incurred qualifying expenditure on plant and machinery on or after 1 April 2023 (but before 1 April 2026) to claim:
- a 100% first-year allowance for main rate expenditure (known as ‘full expensing’); and
- a 50% first-year allowance for special rate expenditure.
In the autumn 2023 statement, the chancellor announced the expiration date of 1 April 2026 would be removed and full expensing would become permanent. The government is also expected to launch a technical consultation on wider changes to further simplify the UK’s capital allowances regime.
It should be noted that expenditure on plant and machinery for leasing remains excluded from full expensing. The government is expected to publish a technical consultation on draft legislation in due course on this area.
Self-employed
Currently the self-employed pay Class 2 NIC where profits are more than £12,570 (it is currently charged at £3.45 per week). Class 2 NICs will be abolished from 6 April 2024, but the self-employed will still continue to receive access to contributory benefits including the state pension.
For those self-employed with profits between £6,725 and £12,570, there will continue to be access to contributory benefits including the state pension through a National Insurance credit without paying NICs (as is the case currently). Those with profits under £6,725 can voluntarily pay Class 2 NICs.
The main rate of Class 4 NICs will be reduced by 1 percentage point from 9% to 8% from 6 April 2024. Class 4 NIC is charged on profits between £12,570 and £50,270. There is currently an additional 2% on any profits over £50,270.
Autumn Statement Summary For Individuals
Cost of living
Everyone has felt the cost of living over the last couple of years and many families (especially those on lower incomes) have struggled immensely. For those on the lowest levels of income, universal credits and other benefits are going to increase by 6.7% from April 2024.
Alcohol duty will be frozen until 1 August 2024. However, for the smokers, tobacco duty will increase by an escalator of 2% above inflation (based on the Retail Price Index). There will also be an increase in the rate for hand-rolling tobacco by an additional 10% above the escalator. The increases in tobacco duty will take effect from 6pm on 22 November 2023.
The state pension will be increased by 8.5% to £221.20 per week from April 2024.
Wages
The national living wage will increase to £11.44 per hour from April 2024. In addition, this will apply to over-21’s (previously it only applied to over-23’s).
Personal tax
There were no increases to the personal allowances (as expected as these have been frozen).
In terms of National Insurance contributions (NIC), these are paid by employees on earnings between £12,570 and £50,270 at a rate of 12%. Urgent legislation will be laid that will cut the main 12% employee NIC contributions by two percentage points to 10%. This reduction will apply from 6 January 2024. This is, of course, a form of ‘tax’ cut which goes some way to cover the cost of freezing the tax thresholds and will save someone on an average salary some £450 per year.
Benefits
The government are making changes to the benefits system with the aim of getting more than 200,000 people back in work.
Rather than signing people off on sick, the focus will be on treatment rather than time off. The government want to provide greater flexibility on working from home arrangements and they are committed to spending £1.3bn over the next five years to help people with health conditions, including mental health problems, to find jobs.
In return, the chancellor announced that if a claimant has not found a job within 18 months, they will be enrolled into a mandatory work placement. If this is refused, the claimant will lose their entitlement to benefits.
If you need bespoke advice as a result of the Chancellor’s Autumn Statement, please contact a member of our team – we’re here to help. Call 0161 905 1801 in Manchester or 01925 830 830 in Warrington, or you can email us via mail@lwaltd.com.