Today’s Autumn Statement has been as highly anticipated as any Budget in recent years. Many were touting it as the Government’s last chance to tempt the voting public with reasons to keep him and his party in Government ahead of the widely anticipated general election next year. However, with what was (or rather wasn’t) announced, perhaps there is more to come in the pre-election build up.
As ever, it was preceded by the usual round up of speculation and rumours, this time ranging from the abolition of Inheritance Tax, to cuts in Income tax, National Insurance and even Corporation tax.
So, what did the Chancellor actually do?
Ahead of releasing our detailed analysis, we have set out our top 10 highlights from today’s announcements.
For Individuals
- National Insurance Cuts
The rumours about a reduction in NIC were one of the few that turned out to be true. The Self- Employed have been rewarded for their hard work since the pandemic by a 1% cut in Class 4 NIC from 9% to 8%, plus the abolition of compulsory Class 2 NIC. Those earning between £6,725 and £12,570 will benefit from a NIC credit without actually having to pay. Those who still wish to pay Class 2 voluntarily, because they fall below the threshold for receiving the credit, will still be given that opportunity to do so.
The cut to Class 2 will save those who have previously paid this, £179 per year. The reduction in Class 4 could save up to a further £377. This will apply from 6 April 2024.
Employees too have benefitted from a reduction in NIC – this time by 2% on the main rate (paid within the basic rate band) from 12% to 10%. This could save taxpayers up to £750, depending on their total earnings. This will apply from 6 January 2024.
Interestingly, no relief has been given for Employers’ NIC rates which remain at 13.8%.
- Tax Rates and Allowances
No changes were announced to any of the current thresholds for paying Tax or National insurance. This remains a stealth tax in many people’s eyes because as wages increase, without increased thresholds, more people find themselves in a higher tax bracket.
- Alcohol Duty Frozen
In a bid to help us all spend more time in our Local, alcohol duty on all alcohol types has been frozen until August 2024.
- Period Pants to be zero rated
The current zero rating on sanitary products will be extended to period underwear from 1 January 2024. Always good news!
- ISA Allowances
No changes were announced to any of the various ISA allowances, which all continue at 2023/4 rates.
- Inheritance Tax
Despite the speculation over the last few months and weeks, nothing was announced in relation to IHT.
Perhaps this was another one of those leaks that we have been used to seeing in recent years, where the Government gauges public reaction before making a decision. Clearly the public did not get excited enough about the prospect of reduced IHT, or the government realised quite how complicated it would have been to remove it. Or perhaps, they are saving this for their manifesto?
For Businesses and Companies
- Full expensing to be made permanent
Initially, this measure was announced to enable businesses to claim a 100% deduction for the cost of qualifying plant and machinery in the first year, on a temporary basis. A 50% first allowance will be given for special rate expenditure.
Today’s announcements make this permanent and is being lauded by the Government as one of the most generous allowances being offered to businesses in modern times.
- Significant Reform to the R&D system
This will see the current two schemes – RDEC and R&D SME – merged from 1 April 2024 in a bid to simplify the system. Under the new scheme, the rate will be in line with the current RDEC rate of 20%.
Loss makers will benefit from a 19% notional tax rate, rather than the 25% rate.
Interestingly, R&D tax refunds will no longer be able to be assigned to third parties, with payments being made directly to all new claimants from April 2024, with no new assignments being possible after 22 November 2023. This measure is primarily to prevent fraudulent claimants but will have an impact on genuine businesses who have this arrangement with their clients.
- Corporation Tax Rates
In general, corporation tax rates have not changed. The amount payable under ATED was one of the few to change, and this will increase by 6.7% from 1 April 2024, i.e. In line with the September 2023 CPI figures.
- Cash Basis
This will be expanded for self employed and partnerships to enable a simplified way of calculating taxable profits for income tax purposes from April 2024, where the cash basis becomes the default method for small businesses when calculating their taxable profits.
What next?
This is just a snapshot of what we know so far and no doubt there will be more to come once we have considered the detail, if you have any questions, please don’t hesitate to contact a member of the team at hello@gravita.com.
Gravita’s full analysis of the detailed announcements will be released over the coming days, watch this space!
