Autumn statement 2023: Positives and implications businesses should know

13 min read

The Autumn Statement 2023 is indeed a game-changer – with some unexpected inclusions that look good in the headlines. As we move towards a new year, the world hopes to enjoy a downturn in inflation and recession. The UK is no exception.
And with the general election looming, Chancellor Jeremy Hunt needed to deliver a statement that widely appeals to the country’s taxpayers and business owners — and he did just that. Or did he?
In this blog post, we outline five key areas discussed in the Chancellor’s speech, which small businesses, startups, and self-employed will find particularly useful:

I. National Insurance (NI) and tax changes

1. No more Class 2 NI

From April 2024, no self-employed person will have to pay Class 2 NI contributions. Currently, they pay a weekly flat rate of £3.45 if their profits exceed £12,570.
This gets scrapped from 6 April 2024. Importantly, they will continue receiving contributory benefits, including the State Pension.

2. Class 4 NI to be cut by 1%

The primary rate of Class 4 self-employed NI contributions will decrease from 9% to 8%, starting 6 April 2024, for self-employed people earning annual profits between £12,570 and £50,270.

3. Class 1 NI rate is reduced by 2%

From 6 January 2024, the Class 1 NI employee’s contribution rate reduces from 12% to 10% on earnings between £12,571 and £50,271. It will remain at 2% on salaries above that threshold. The Employer’s rate remains unchanged.

4. No SATR submissions for specific individuals

Individuals who only pay tax through PAYE will not have to submit a Self Assessment tax return (SATR) from the financial year 2024/25. Those in receipt of child benefit and earn above the £50,000 annual threshold will still have to submit one though. This High Income Child Benefit Charge (HICBC) threshold has remained unchanged since its introduction in 2013.

5. New legal rights of employees

Employees now have the legal right to ask their employers to pay their NI contributions to an existing plan. That way, all of their savings can be consolidated in one place.

II. Wage and pension-related

1. National Living Wage increases

It increases to £11.44 from April 2024, highlighting an increase of just over £1 from the current rate of £10.42 per hour. The new National Living Wage applies to workers aged 21 and above.

2. New rule for state pensions

The state pension will be set to £221.20 per week, starting from 6 April 2024, boosted by 8.5%.

III. Business operations and support

1. “Full expensing” to be made permanent

That means that the investments made by companies in qualifying plant and machinery will continue qualifying for a 100% first-year allowance for main rate assets, and a 50% first-year allowance for special rate (including long life) assets after 1 April 2026.

2. Extended relief for retail, hospitality, and leisure (RHL) properties

Around 230,000 RHL properties are eligible to receive cash support up to £110,000 per business for 2024/25 as the existing 75% relief for eligible RHL properties has been extended for the new financial year, reflecting a tax cut worth £2.4 billion.

3. Tax relief for loss-making businesses

The qualifying expenditure threshold for loss-making businesses is decreased from 40% to 30%. Those who fall below the 30% qualifying expenditure get a one-year grace period before they stop getting relief.
From April 2024, the government will merge Research and Development Expenditure (RDEC) and SME schemes. The notional tax rate is fixed at 19%.

4. The tax rate for small businesses remains unchanged in 2024-25

The standard multiplier tax rate has been steady at 49.9p for four consecutive years. However, in light of the recent September Consumer Prices Index (CPI), it is projected to increase, with the new rate expected to reach 54.6p.

5. Help available to tackle late payments

Companies seeking government contracts over £5m+ must show that they pay their purchase invoices within an average of 55 days. This timeframe will be reduced to 45 days in April 2025 and shortened to 30 days in the future.

IV. Accounting and reporting

1. Cash basis accounting changes from April 2024

Starting from 6 April, 2024, the government will implement new financial measures that will:
  • Establish cash basis accounting as the standard method for businesses while providing an option to opt out for those who prefer accrual accounting. This is a reversal from the current standard, which favours accrual accounting.
  • Remove the £500 cap on interest expense deductions under the cash basis.
  • Eliminate the turnover threshold, allowing all businesses to use cash-based accounting without a maximum limit.
  • Lift restrictions on claiming relief for losses incurred using the cash basis method.

2. Making Tax Digital (MTD) requirements to simplify from April 2026

The government has announced several changes to MTD for ITSA (Income Tax Self assessment) in a bid to improve the system for taxpayers and their representatives, including:
  • Enabling landlords to opt out of submitting quarterly updates of their expenses, which relate to jointly owned properties. This will reduce their in-year administration.
  • Removing the requirement to provide an End of Period Statement
  • Enabling taxpayers using MTD to be represented by more than one tax agent
  • Exempting some taxpayers, including those without an NI number from MTD
The draft regulations will be published for technical consultation at a later date.

V. Investment and planning

The EIS and VCT legislation contain sunset clauses, which previously limited income tax relief to shares issued before 6 April 2025.
These sunset clauses have been extended for ten years, till 6 April 2035, making income tax relief available for investors in qualifying companies and VCTs.
Our thoughts
We agree that this statement represents modern British history’s largest business tax cut. It reflects a sustained commitment to fostering the UK’s economic growth and reducing administrative burdens.
However, it does come with its fair share of challenges and trade-offs because balancing fiscal responsibility with growth stimulation often requires choices that can hamper public services, taxation levels, and government borrowing.
For example, “full expensing” does not exactly benefit smaller businesses. They already have a £1 million annual investment allowance, often exceeding the total investment over the equipment lifespan.
Secondly, while claiming full expensing on new assets like factory equipment or lorries offers immediate tax relief, selling them later can add to tax liabilities on any profit made from the sale, which businesses must account for.
The changes to Class 1 NI which are set to take effect, unusually, in the middle of the financial year, will be challenging for payroll managers and those in charge of payroll, to implement with such a short timescale.  Hints of an early election are supported by this action.
Lastly, the phenomenon of “fiscal drag” persists, potentially eroding the real value of income over time due to inflation. This could be addressed in the Spring Statement 2024, perhaps with additional measures.
The overall effect of the Autumn Statement does not reduce the tax burden which still remains at its highest level. If you have any queries or concerns about the autumn statement or need help to review your business or personal tax status, please contact our team.
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