On 22 November 2023, the Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement, announcing business tax cuts with what he describes as the “biggest tax cut in modern British history”.
Announcing a forecast for inflation to drop to 2.8% by the end of 2024 and hit the 2% target in 2025, the tone of the Statement was significantly more positive than 2022 and exceeded many initial expectations in addressing persistent demands for tax cuts from some Conservative MPs. A reduction in the headline rates of National Insurance Contributions also delivers a tax cut for individuals.
Key announcements included the following:
Business taxes
- The 75% business rates discount for hospitality, retail, and leisure is being extended for another year.
- The “full expensing” policy for capital investment, announced as a two-year temporary measure at the Spring Budget, will be made permanent. This provides:
- A 100% first—year allowance on qualifying main rate plant or machinery –
- A 50% FYA for “special rate” plant or machinery
- A single merged R&D scheme will be implemented at the current R&D expenditure credit rate of 20%. The notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than the current 25% rate. The new scheme will take effect in relation to accounting periods beginning on or after 1 April 2024. The threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%.
- 3 further investment zones in West Midlands, East Midlands, and Greater Manchester were announced, with plans for an additional 12 in the spring.
- The Investment Zones programme and freeport tax reliefs will be extended from 5 years to 10 years, and a new £150 million Investment Opportunity Fund will support Investment Zones and Freeports to secure specific business investment opportunities.
Work and welfare
- The main rate of National Insurance Contributions (NICs) will be reduced by 2%, falling from 12% to 10% from 6 January 2024.
- Class 2 NICs are abolished and Class 4 reduced from 9% to 8% from April.
- The National Living Wage to rise by almost 10% to £11.44 an hour.
- The state pension will increase by 8.5%.
- Changes to the rules for pension funds will give workers the right to require new employers pay pension money into an existing pension pot.
- £50m will be available over the next two years to increase the number of apprenticeships in engineering and other sectors.
- Benefits will be increased by 6.7%, in line with September’s inflation figure.
- Housing allowance to be increased by an extra £800 next year.
- There were no announcements in relation to changes to Inheritance Tax or a reduction in Income Tax rates, as had been rumoured might make an appearance.
Other measures
- New rules will encourage local authorities to fast-track major business planning applications.
- Companies bidding for large government contracts will be required to pay invoices within 30 days.
- Planning laws will be changed to make it easier to convert homes into two flats.
- All duties on beer, cider, wine, and spirits will be frozen until 1 August next year.
As always, your usual DSG contact will be happy to discuss the impact of these and any other such development on you and your business. A more detailed analysis of the announcements is also available here (link).
A copy of the Chancellor’s speech is available here: https://www.gov.uk/government/speeches/autumn-statement-2023-speech