…And the Chancellor Taketh away.
The Chancellor Jeremy Hunt set out some future plans for the UK’s economic future direction of travel in his Autumn statement.
His main aims were to achieve growth while trying to bring down inflation to the target of 2% and offset the negative impact of the ongoing cost of living crisis.
We look at the headline announcements and dig into the small print to see what the decisions will mean for you and your business.
National Insurance Contributions (NICs)
There has been no change to National Insurance thresholds but contributions for some employees will be reduced from January 6th 2024.
The main NI rate will be reduced from 12% to 10% but employers will still pay NICs at 13.8% for all employees earning more than £8,840 a year – excluding staff aged 21 or under or apprentices aged 25 or under).
The Employment Allowance will remain at £5,000 until March 2026. This means that eligible employers can reduce their NIC outgoings by up to £5,000 a year which could be worth a tax cut of £1,000 per employer.
For the self-employed, there are changes to both Class 2 and Class 4 rates which will apply from April 1st 2024.
Class 2 National Insurance paid by self-employed workers earning more than £12,570 will be scrapped. This will also get rid of the flat rate compulsory charge of £3.45 per week.
Class 4 National Insurance will be reduced from 9% to 8%. This is payable on profits between £12,570 and £50,270 and will remain at 2.73% on profits over £50,270.
The national living wage for workers aged 21 and over will increase by 9.8% from April 1st 2024.
The new rates from then will be:-
- £6.40 per hour for apprentices
- £6.40 per hour for employees under 18
- £8.60 per hour for employees aged 18-20
- £11.44 per hour for employees aged 21 and over
While business rates are expected to rise for all based on the rateable value of a commercial property, the Chancellor announced that the Retail, Hospitality and Leisure business rates relief scheme will be extended for another year to 31st March 2025.
This provides eligible businesses in those sectors with 75% relief on the scheme up to a cash limit of £110,000 per business.
The main corporation tax rate will stay at 25% – paid by limited companies on any profits over £250,000 made from trading or the sale of assets or investments.
Profits of £50,000 or less will pay the small profits rate (SPR) of 19% while profits between £50,000 and £250,000 will be charged at a higher rate of 25%.
Some marginal relief is offered on this amount but please consult your accountant in all instances.
Full capital expensing for businesses has been made permanent. This means that every £1 a business invests in its IT, plant or machinery improvements can be deducted in full from any taxable profits.
The Chancellor announced that the following areas will see strategic dedicated investment over the coming years. They are:
- AI – £500 million to be invested over the next two years to fund AI innovation centres
- Green industries – £960 million will be invested in a Green Industries Growth Accelerator for offshore wind and electric networks, nuclear, carbon capture, utilisation and storage (CCUS) and hydrogen technologies
- Manufacturing – £4.5 billion will be used to attract investment in strategic manufacturing sectors
- Automotive – £2 billion will be invested in zero emissions technology in the auto industry
The following rates will apply until March 31st 2028:-
|Income tax rate
|£1 to £12,570
|£12,571 to £50,270
|£50,271 to £125,140
|£125,141 and above
It was confirmed that the state pension will increase by 8.5% from next year and a consultation will be launched to give workers a legal right to require a new employer pays pension contributions into an existing pension rather than creating a new one.
The idea is that they have just one pension pot account but this could be problematic to create and oversee.
The day after the Autumn statement Ofgem announced that the domestic energy price cap will increase by 5% to £1,931 for a typical dual fuel household. This will come into effect from January 1st 2024.
Businesses do not have any price cap but some are eligible for the Energy Bills Discount Scheme which is set to end entirely on March 31st 2024.
This provides a discount on gas and electricity for non-domestic contracts that qualify. Prices are lower than they were at their peak in late 2022 but wholesale prices are still twice as high as they were at the start of 2021 and the out-of-contract rates offered by suppliers’ are 40% higher than on non-domestic contracts.
Ofgem are considering an adjustment to the cap to help stop energy suppliers going bust which could see an increase in domestic bills after April 2024.
The qualifying rate of the dividend tax will be cut by 50% from £1,000 to £500 from April 1st 2024.
This means that any dividend income over £500 will be taxable. This should make members’ voluntary liquidations (MVL) more attractive to any directors looking to most efficiently realise their assets.
Capital Gains tax
Any shares sold at profit will be eligible for capital gains tax (CGT).
Higher rate taxpayers will pay 20% CGT while the tax-free threshold will be redacted to £3,000 from April next year.
R&D tax relief
There is a Research and Development (R&D) tax relief scheme for small and medium sized businesses who are working on innovative projects in the science and technology sectors.
This will be merged with the existing Research and Development Expenditure Credit (RDEC) to reduce complexity and encourage more businesses to claim.
Cigarettes and alcohol
Retailers and hospitality businesses will be interested to learn about any changes to alcohol and tobacco duty in the statement.
Alcohol duty remains frozen until August 1st 2024 while tobacco duty, including certain vapes, will increase by 10%.
Business owners and directors will always be scouring the announcement and proclamations to work out if they are coming out ahead or behind financially.
But there remains one strategy that is almost always guaranteed to give them clearer insight into their position and give them new ideas and direction about what they can do to materially improve their prospects in the short, medium and longer terms.
Once they get a clearer idea of where you’re starting from, they’ll be able to help you draw up a detailed roadmap to help you get where you want to be and avoid any pitfalls and potholes along the way.
The sooner you get in touch, the sooner you can get to work on your own budget plans.