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Business Services  •  Business Tax  •  Personal tax

How does the 2023 Autumn Statement affect you?

By RJP LLP on 22 November 2023

Today’s Autumn Statement was widely leaked over the past few days but it’s never official until it’s included in the actual Budget event. Contrary to all the hype, there was nothing on inheritance tax, stamp duty or corporation tax rates.

Here is a summary of the key announcements Chancellor Jeremy Hunt did make today, some of which come into effect from January 2024.

Permanently extended full expensing for capital allowances

Jeremy Hunt has confirmed British firms are set to benefit from what he described as “the largest business tax cut in modern British history” with full expensing being made permanent. Full expensing allows limited companies to offset the full cost of purchasing plant, machinery, technology and IT equipment against their annual profits in a single period rather than having to spread the cost across multiple years. As an example, for every million pounds a company invests, it will receive a £250,000 tax reduction in the same year. The unrestricted tax relief is not available to sole traders or partnerships. Companies buying assets should be aware that many assets including land and buildings, cars and assets bought for leasing are excluded. In addition, if the asset is sold in the future, a stand-alone balancing charge will arise, making any profits taxable.

New high tech and manufacturing investment schemes

A number of different schemes aiming to support the tech economy were unveiled. A new £500m investment programme will fund innovation centres in key locations to help turn the UK into an “AI powerhouse.”

£4.5bn is being made available for “strategic manufacturing investments” in the aerospace, manufacturing and green sectors and there will be increased tax relief available for freeports and enterprise investment zones, with their special tax advantaged status being extended from 5 to 10 years.

Three new investment zones focusing on advanced manufacturing are being created, with the launch of a £150m Investment Opportunity Fund for these zones. A further £50m in funding will be made available over the next two years for new apprenticeships.

There was confirmation of the new, merged research and development (R&D) scheme that combines the R&D expenditure credit (RDEC) and small or medium-sized enterprise (SME) schemes. This has been expected for some time and the Chancellor stated that the new scheme will help reduce the rate at which loss making companies are taxed, from 25% (as per the current RDEC scheme) to 19%.

Cuts to NICs and living wage ‘increases’

Major reforms were announced addressing taxes for self employed people. Starting from April 2024 there will no longer be Class 2 National Insurance contributions and a 1% reduction to Class 4 National Insurance contributions will be introduced with the rate dropping from 9% to 8%.

The national living wage for people aged 23 and over is increasing to £11.44 per hour from April 2024, an almost 10% increase.

The main rate of National Insurance contributions for employees will be set at 10%, a 2% reduction, effective from 6 January 2024. It is currently charged at 12% on earnings between £12,571 and £50,271 - and 2% on anything above that.

Bear in mind that due to the effects of fiscal drag, these ‘tax cuts’ and wage increases will not have much of an impact on people’s disposable income. Due to the personal allowance threshold remaining frozen, increases in wages will guarantee the Treasury gets to tax more of people’s income than before, as more people on lower incomes become taxpayers.

Pensions and savings reviews

A consultation will commence in 2024 to review pension regulations, with a view to exploring the possibility of reforms giving savers the chance to have a single pension pot into which all their pensions can be transferred.

The state pension is being increased; from April 2024, the new full state pension will increase by 8.5% estimated to be worth up to £900 more a year.

Big changes were announced to ISAs and long-term asset funds, full details are to be announced.

Other announcements – business rates and simpler planning rules

The cost of business rates for small businesses is being frozen for this year and the existing additional 75% rate discount for small businesses in the retail, hospitality and leisure sectors is being extended until 2025.

Good news for builders and construction companies; there will be reforms to the planning system, allowing local authorities to retain more money if they speed up their processing of planning applications. There will be new permitted development rights introduced, to allow any house to be converted into two flats, with a view to easing the housing shortages.

Keep an eye out for more Autumn Statement Budget 2023 updates from us. There may be more to cover in the coming weeks that didn’t make the headlines. If you have any queries concerning your taxes, please get in touch with us directly, via partners@rjp.co.uk.

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