How does the Autumn Statement 2023 impact me?
Chancellor Jeremy Hunt presented a comprehensive set of measures during what he termed an "Autumn Statement for growth”. However, for small and medium business owners, there was not too much on offer for you to get your teeth into. Below we have summarised some of the key changes that were implemented that may affect you.
National Insurance drops from 12% to 10%
If you are an employee, this change means that from 6 January 2024 you will save 2% on your national insurance contributions in your “basic rate tax band”. The basic rate tax band is usually on your earnings between £12,570 and £50,270. Where earnings are over the basic rate tax threshold, the national insurance rate changes to 2%. There has been no change to this rate. Please see an example below of an employee with a £60,000 salary:
As you can see, there are no additional savings made after the the basic rate band threshold. As such, the maximum you can expect to save is £754. The median average earnings in the UK are around £35,000. The Class 1 national insurance you can expect to save at this salary level is £448.60.
N.B.
There has been no change to Class 1 national insurance contributions for employers i.e. "Employers' national insurance". This remains at 13.8%
What if I am self-employed?
Self-employed individuals are not subject to Class 1 and Class 1a national insurance. Instead, self-employed individuals may be liable to Class 2 and Class 4 national insurance.
Class 4 national insurance is due on trade profits where income is over £12,570 at 9%. This then drops to 2% once income exceeds £50,270. This is very similar to Class 1 national insurance for employees where the rates are now 10% and 2% respectively.
However…. It was announced that from 6 April 2024, Class 2 national insurance payments have now been abolished. Previously, the maximum payment due on Class 2 national insurance was £179.40 per year (2023/24 tax year). Please note that while the mandatory payment of Class 2 will be abolished, you will still continue to receive access to contributory benefits including the State Pension if your earnings are over £6,725. If your earnings are below this threshold, you can still make voluntary Class 2 payments to ensure that you qualify for state benefits.
Company fixed asset tax relief - Full expensing capital allowances made permanent
During the Spring Budget 2023, the government swapped out the “super deduction” system for “full expensing”, enabling businesses to deduct the entire expense of new eligible plant and machinery investments from their taxable profits for a three-year period starting 1 April 2023.
Now, the government are solidifying this alteration by instituting a permanent shift, offering a 100% first-year allowance for main rate assets and a 50% first-year allowance for special rate assets (including long-life assets).
Bearing in mind that all businesses (not just companies) have an “annual investment allowance” (or AIA) which allows businesses to claim 100% tax relief on new and second-hand assets qualifying as plant and machinery (excluding cars) of up to £1m per year, full expensing is unlikely to be taken advantage of by smaller businesses.
State pension to rise by 8.5%
In a very welcome announcement, under the 'triple lock' guarantee, the state pension is set to increase by 8.5% starting in April 2024. This will result in a weekly boost of up to £17.35 (£13.30 on the old basic pension) for millions of pensioners.
How much more state pension will I receive a year?
If you reached state pension age after April 2016:
— You can expect to receive an additional £905.30 per year in basic state pension payments.
If you reached state pension age before April 2016:
— You can expect to receive an additional £693.98 per year in basic state pension payments.
What about other state benefits?
Specific benefits like Universal Credit will see a 6.7% rise from April next year.
N.B.
The 'triple lock' is a commitment where the government have pledged to safeguard pensioners so that the value of their state pension is not overtaken by the cost of living. As such, the state pension will increase by whichever is highest of average earnings growth, CPI inflation, or 2.5%
Business rates relief extended to 2024/25
Businesses in the retail, hospitality and leisure sectors can claim up to 75% business rates relief (if eligible). This has been extended for another year from 6 April 2024 to 5 April 2025.
What businesses qualify for this relief?
You may be able to qualify if your business is mainly used as a:
Shop
Restaurant, café, bar or pub
Cinema or music venue
Hospitality or leisure business - for example, a gym, a spa or a hotel
Research & Development (R&D) reform
The existing Research and Development Expenditure Credit (RDEC) and SME schemes are set to combine, allowing expenditure incurred in accounting periods starting on or after April 1, 2024, to be claimed within this unified scheme. Within this merged setup, the notional tax rate for loss-making entities will decrease from the current 25% in the RDEC scheme to 19%.
Furthermore, the intensity threshold for additional support aimed at R&D intensive SMEs facing losses will be decreased from 40% to 30%. This adjustment will encompass approximately 5,000 more R&D intensive SMEs, expanding the scope of relief. Additionally, a one-year grace period will be introduced, enabling companies that fall below the 30% qualifying R&D expenditure threshold to still receive relief for a year.
