This is a first look at the Autumn Statement 2023, delivered 22nd November 2023.
First, a few caveats
- This analysis is focused on the interests of a typical client of Whitefield Tax or our daughter business YogaTax – it is not a comprehensive review of all measures.
- It is intended to be apolitical, and any bias is unintentional.
- It is a first look, and inevitably some items will clarify or change over coming days and weeks.
In setting the scene for this statement, its worth noting that the historic distinction between spending announcements and tax announcements seems to have been lost in recent years, and this statement is no exception. It seems the expectation is there will be another set piece announcement in the Spring. The politicisation of the technical detail of tax and Government spending, cf: headline party policies, is regrettable.
- Office of Budget Responsibility (OBR) estimates the the Autumn Statement will boost business investment by £14bn and bring 78,000 into employment over the medium term; and it’s suggested that the combined effect of the Spring and Autumn Budget this year is to bring an extra 200,000 into work. Google suggests UK unemployment was about 1.45m people in July 2023, so this is a significant tightening of the labour market. Yet almost all businesses report difficulties with labour supply, both in absolute availability and skills mix. So the inevitable question is where the extra workforce is coming from and going to?
- OBR estimate 0.3% GDP growth from the Autumn Statement, and 0.2% from the Spring Budget. 0.5% growth is better than 0.5% recession, but it feels like only a small step toward the UKs prosperity.
- Government Debt is falling – but from extremely high levels following the pandemic and energy crisis. Debt forecast to be 92.8% of GDP by 2028-29. By contrast, there was a low point of 21.7% in 1990/91 and it was 35.6% pre the financial crisis in 2007/08. We – UK collectively – need a lot of growth and productivity gains, or a long period of austerity, to bring this debt under control – and why does it matter? Debt doesn’t feel so real when interest rates are low, but for Governments, Businesses and Individual households, the risk is that when interest rates rise the servicing costs of the debt become uncomfortable.
Business Tax Proposals
- Self Employed NI reforms for Sole Traders and Partners:
- Class 4 Self Employed NI rate cut from 9% to 8% from 6th April 2024.
- Class 2 NI abolished from 6th April 2024. Currently this is £3.45 a week, so £180 a year.
- Currently people pay both classes of NI, the fixed Class 2 and the variable Class 4. Class 2 however is the one which gives access to State Pension and Benefits, so there will need to be reforms in this area, and an impact on protecting pension rights for those with part time self employments . For 2024-25 an optional voluntary Class 2 NI for those with profits below £6.725 pa will remain, and people earning over £6,725 pa will get an NI credit even though they will not start to actually pay NI until £12,570 pa, which mirrors the approach taken for employees with lower earnings. The take away is people will need to watch their benefit accrual closely.
- This doesn’t affect people working through Companies.
- Autumn Statement 2023: National Insurance Factsheet
- No changes to Employers NI despite reductions in NI for employees and the self employed
- Full Expensing for Capital Expenditure made permanent – it was temporary until March 2026:
- Only available to Companies, not Sole Traders and Partnerships.
- In practical terms it is only of benefit if CapEx is over £1m. Below £1m all businesses – incorporated and unincorporated – benefit of a £1m Annual Investment Allowance which gives the same relief.
- Business Rates:
- Freezing of Non Domestic Rating Multiplier for smaller properties
- Extension of Retail, Hospitality and Leisure Business Rates 75% Discount Scheme until 2025
- No changes to the Small Business Relief Thresholds of £12k rateable value with a taper to £15k
- Confirmation that various R&D Tax Relief schemes will be merged from April 2024. This is an area wrought with problems at present, with complex rules deterring some businesses, yet at the same time a proliferation of abusive tax avoidance schemes.
- IR35 and off payroll working – no major changes, but a commitment to allow HMRC to offset taxes already paid in re-categorisation cases, from April 2024. If you go back in the midst of time this tended to happen on an informal basis anyway, but less so in recent years due to changes in practice and case law. It is a welcome, and fair, simplification.
- Some proposed simplifications to the Making Tax Digital reporting requirements:
- Quarterly submissions now to be cumulative rather than stand alone
- Abolition of End of Period Statement (EOPS) requirement
- No change to thresholds or staging dates – April 2026 turnover threshold £50k, April 2027 turnover threshold £30k
- Reforms and simplifications to Construction Industry Scheme:
- Including VAT compliance in tests for Gross Payment Status
- Accelerating first review period for businesses with Gross Payment Status
- Making Cash Basis the default accounting treatment for unincorporated businesses (Sole traders and partnerships) in respect of Self Assessment:
- Ability to opt into accruals accounting
- Restrictions on claiming interest costs and loss relief on cash accounting dropped
- Cash accounting entry and exit thresholds abolished
- Unclear how this effects Accounting Standards and GAAP. In reality most businesses of any size will want to continue to use accruals accounting for accurate reporting
- This is for Self Assessment. No changes to VAT Cash Accounting Scheme. No changes to reporting for Companies.
- Two new HMRC reporting requirements confirmed from April 2026:
- Reporting hours worked on RTI submissions by employers
- Shareholders in small companies to separately report the dividends from those companies and their percentage shareholding on their Self Assessment (currently aggregated)
- National Living Wage increases to £11.44 headline rate from April 2024.
- No significant VAT announcements, and no changes to registration thresholds.
- No changes to Corporation Tax.
- No changes to Income Tax rates, Personal Allowances or Thresholds.
Personal Tax Proposals
- Class 1 Employee NI rate cut from 12% to 10% from 6th January 2024.
- EIS and VCT schemes extended from April 2024 to April 2025 – who knew they were due to expire?
- No changes to Income Tax rates, Personal Allowances or Thresholds.
- No changes to CGT or IHT despite much press speculation last weekend about IHT being abolished or significantly reduced.
Indirect Tax and Duty Proposals
- Alcohol Duty frozen until 1st August 2024. Tobacco increasing by RPI plus 2%.
- Vehicle Excise Duties (“Road Tax”)increased by RPI.
Benefits and Welfare Proposals
- Most benefits to uprate by 6.7% for 2024-25, using September inflation rate. It was possible that a lower uprating would have been used reflecting the fall in reported inflation in October, however clearly with inflation having been running high all year, this will be a welcome announcement by those receiving benefits.
- State Pension Triple Lock maintained meaning a rise of 8.5% in State Pensions for 2024-25 in line with Average Earnings Growth.
- Increases to the housing element of Universal Credit to reflect increases in Private Sector Residential Rents.
- Selection of carrot and stick type proposals to get people off benefits and into work, reflecting concerns about decreased labour market participation post pandemic.
- Consultation into possibility of portable lifetime pension Defined Contribution pension schemes for employees – at present employers mandate the scheme used, the employers own or a Stakeholder arrangement like Nest. This proposal would allow the employee to mandate where the pension contribution is invested.
Other Notable Proposals
- Doubling of maximum prison sentence for tax fraud from 7 years to 14 years.
- New rules for penalising promoters of tax avoidance. It is worth noting that the boundaries between legal tax avoidance and illegal tax evasion continue to blur. In reality these proposals target the most egregious schemes and their promoters; there is still plenty of scope for tax mitigation without resorting to these schemes.