Summary of the Autumn Statement

Chancellor Jeremy Hunt delivered the Autumn Statement in the House of Commons on Wednesday, 22 November 2023.

No doubt your inbox and social media newsfeeds are full of articles, summaries and commentary regarding the Autumn Statement.  Oh, and here’s another one!

We will keep this as brief as possible and focus on the matters that we think relate to most of our clients and our audience.

The economy

The backdrop to this statement is the government’s target to stimulate economic growth and reduce inflation.

Growth forecasts are provided by the Office for Budget Responsibility (OBR), which is a non-departmental public body. Growth has been weak since the beginning of 2022, and growth forecasts for the next few years are lower than the Chancellor announced last March.

Inflation figures are coming down. However, this is coming off of the disastrous Truss/Kwarteng mini-budget, which pushed inflation and interest rates up. Inflation is still high, and in areas such as food and energy, we have the highest inflation rates across the G7 economies.

Growth in wages has overtaken inflation, which is good news for the consumer but not so good news for employers.

For businesses and those operating their businesses through a company

Dividend taxes

There are no changes to the rates of tax, and these remain at:

• the dividend ordinary rate - 8.75%

• the dividend upper rate - 33.75%

• the dividend additional rate - 39.35%.

The government will reduce the Dividend Allowance from £1,000 to £500 from 6 April 2024.

Corporation tax

The main rate will stay at 25% for companies with profits over £250,000.

The 19% small profits rate will be payable by companies with profits of £50,000 or less.

Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Capital allowances

For most of our clients, the Annual Investment Allowance (AIA) applies and can be claimed on capital expenditure of up to £1 million. Frankly, we don’t have many clients who are spending more than £1 million on capital in any single year. The “full expensing” which has been mentioned enables larger companies to claim 100% allowances on expenditure over £1 million.

Annual Investment Allowance (AIA) enables companies to claim 100% capital allowances on qualifying expenditure on new plant and machinery. This allows full tax relief on expenditure in the year it is incurred. This could include equipment, lorries, computers and certain fixtures such as kitchen and bathroom fittings, data cabling and alarm systems.

For example, £500,000 spent on qualifying items would give £125,000 off a corporation tax bill for a company paying tax at 25%. The amount of expenditure that can qualify for full expensing is uncapped.

National Living Wage and National Minimum Wage

From 1 April 2024, workers aged 21 and over will be entitled to the National Living Wage. Formerly this applied to those aged over 23.

The NLW will increase from £10.42 to £11.44 starting from 1 April 2024.

The rates which will apply from 1 April 2024 are as follows:

• NLW (21+) - £11.44

• 18-20 - £8.60

• 16-17 - £6.40

• Apprentices - £6.40

VAT

The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.

Business rates

The small business multiplier will be frozen for another year.

75% Retail, Hospitality and Leisure relief will be extended for 2024/25.

Income tax and national insurance

Income taxes and allowances

There are no changes to the rates of tax, and these remain at for 2024/25:

• Basic rate - 20%

• Higher rate - 40%

• Additional rate - 45%

The government reduced the point at which individuals pay the additional rate of 45% from £150,000 to £125,140 for the current tax year, and this will continue for 2024/25.

The income tax personal allowance and basic rate limit are fixed at their current levels until April 2028. They are £12,570 and £37,700 respectively. For those entitled to a full personal allowance, the point at which they will pay income tax at the higher rate will continue at £50,270.

National insurance contributions through employment.

The main rate of Class 1 employee NICs will reduce from 12% to 10% from 6 January 2024.

No reduction to the employer Class 1 NIC, and this remains at 13.8%.

National insurance contributions for self-employment

Class 2 self-employed NICs will be abolished starting from 6 April 2024, which is currently £179.40 per year.

Class 4 self-employed NICs cut from 9% to 8% starting from 6 April 2024.

Other announcements

Capital Gains Tax

The capital gains tax annual exempt amount will be reduced from £6,000 to £3,000 from April 2024.

No other changes.

Inheritance tax

The inheritance tax nil-rate bands will stay fixed at their current levels until April 2028. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million.

State Pension

Increased by 8.5% from April 2024, in line with average earnings.

Pension tax limits

A number of changes were made to the tax regime for pensions for 2023/24, and these include the following, which will remain at their 2023/24 levels for 2024/25:

• The Annual Allowance (AA) is £60,000.

• Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.

• No Lifetime Allowance (LA) charge.

In addition, as previously announced the LA of £1,073,100 will be abolished from 2024/25. Changes will be made to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.

Extension of NICs relief for hiring veterans

The government is extending the employer NIC relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025. This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.

Individual Savings Accounts

The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.