Autumn Statement 2023 first reactions
Posted on: November 22nd 2023 · read
MHA's first reactions on the Autumn Statement 2023 amidst global challenges and promising tax reforms.
Against the background of a warring nations, high energy prices, inflation at more than double the target of 2%, higher interest rates, stagnant growth and the prospect of a change in Government in 2024, it was always going to be very difficult to plan for the future, reduce tax and operate within their “fiscal rules”.
Every debit has a credit, right? Reducing tax runs, the risk of increasing demand and in turn inflation and interest rates. Despite the tax burden in the economy being at a 70 year high, with headline rates such as the top rate of income tax and capital gains tax remaining relatively low, it is hard to pinpoint the increase. The UK still has a lower tax burden than some other major European countries. Part of the increase in tax is due to “fiscal drag” where thresholds and allowances lag behind inflation.
We were told to expect tax cuts and Mr Hunt did not disappoint. For business, he confirmed 110 new measures.
Starting with sole traders and partnerships, they will see a saving of almost £550 per year through a reduction in Class 4 National Insurance from 9% to 8% and the abolition of Class 2 National Insurance.
For companies which invest heavily in plant and machinery, the 100% full expensing allowance has been made permanent allowing a corporation tax saving of 25p in every £1 spent. Only companies will benefit, sole traders and partnerships will have to rely on the Annual Investment Allowance which is still £1m per annum.
Continuing the theme of National Insurance savings, surprisingly, from 6 January 2024, the rate at which employees pay this is reduced from 12% to 10%, saving approx. £450 per year on a typical salary of £35,000. Whilst not directly impacting business profits, this should help to motivate employees.
As expected, the R&D tax incentives for SME companies will be combined with the regime for large companies, making it potentially less attractive, albeit more targeted.
Inheritance tax savings were mooted before today, but nothing came to fruition. The Government continues to crack down on tax avoidance. Changes in off-payroll arrangements for umbrella companies and other agencies will take effect in 2024. Those in the Construction Industry will also see some changes next year mainly around the conditions for removal of the gross payment status.
Finally, there was welcomed news as we approach the festive season, alcohol duty is frozen and pubs are given business rates savings. I hope that the cost of my favourite tipple reduces!
For further guidance
For further guidance on any of the tax measures discussed in this article, please contact your usual MHA advisor or contact us
Read the latest Autumn Statement 2023 commentary on our dedicated hub, where we will be providing resources, advice and practical guidance on what any new tax measures mean for you and your business, to help you prepare for and manage their impact.