2023 Autumn Statement commentary
As a result of an ill-considered poll on LinkedIn earlier this week, our 2023 Autumn Statement commentary will have the theme of TV quiz shows. Therefore, expect more shoehorning than your Grandad putting on his Sunday best brogues as Tax partner Craig Coyle reviews the Chancellor’s latest budget statement.
The 1% Club
The self-employed are presumably now members of this club and not the Lee Mack-fronted gameshow of the same name. Class 4 National Insurance rates for the self-employed have been cut from 9% to 8% between the lower and upper limits, with the removal of Class 2 contributions for those with profits over £12,570.
This is designed to broadly match the saving for the employed, for whom the rate of Employees’ NI will be cut from 12% to 10%. The effect of the saving is therefore capped at just over £50,000 (i.e. the saving increases until earnings reach this point then it flatlines and thus does not benefit higher earners more) and just over £750 per annum.
Using National Insurance rather than income tax means this is targeted at “workers” and the intention behind it was quite clear given the examples used by HM Treasury:
- A cleaner working night shifts on £21,000 will receive a gain of £170
- A hard-working family with 2 earners on average earnings of £35,404 will be £900 better off.
This is a measure which will reduce the tax burden on anyone with employment income from January 2024, and the self-employed from April 2024.
The Wheel turns for R&D specialists
HMRC’s attitude to R&D claims has changed dramatically in recent times. Whether your business poured R&D cash into reinventing the wheel or creating the Michael McIntyre gameshow, the Autumn Statement brought confirmation of the absorption of the more generous SME system into the rules of the large company Research and Development Expenditure Credit (RDEC) scheme.
There were some tweaks made to the rules to make them more generous for loss-making companies and also to lower the bar for being an R&D-intensive company. The latter may still have access to more generous rates of relief, but confirmation that the regime will be less generous to SMEs more generally from April 2024 is now with us. The supporting note claiming that this is “boosting innovation” however seems to imply that the target audience here is inward investment rather than UK start-ups.
Full Expensing becomes Tenable
Full expensing, which was only introduced for an initial 3-year period, has now been made permanent (or, as with all things tax, permanent until someone decides it isn’t). Expenditure on qualifying plant and machinery should therefore continue to qualify for allowances at 100%. This is an attractive incentive to large/capital-intensive businesses, but most SMEs would not have spent more than the £1m previously allowable under the Annual Investment Allowance in any event.
A broader consultation was also announced to look at simplifying capital allowance rules more generally in light of the above.
Who wants to stay a Millionaire?
Despite rumours to the contrary, there was no change in either the rates or £1m threshold (including the residence nil rate band) for Inheritance Tax. It could be argued that the ‘leaks’ were a way to ask the audience what they thought of the idea as a priority. The Chancellor also decided to phone a few of his friends on the backbenches to see if they were in favour. In the end, Mr Hunt decided not to gamble.
Family Fortunes (only for viewers in Scotland)
The Scottish Budget takes place on 19 December 2023. As National Insurance is not a devolved tax, the cut announced will be effective in Scotland.
The Scottish Government may of course look to increase rates (or introduce additional bands) of income tax to increase their tax take. This would be the equivalent of the attractive live football fixture on ITV getting replaced by a repeat of Family Fortunes with Les Dennis. It may come to pass that the decrease in the tax burden is a case of now you see it, now you don’t in Scotland.
Tax advice and support for businesses and individuals
As always, the Tax team and I here at Consilium Chartered Accountants are available to discuss any queries regarding the changes resulting from the 2023 Autumn statement.
To arrange a confidential virtual or in-person meeting, please contact Craig Coyle.