The UK Autumn Statement 2023, delivered by Chancellor Jeremy Hunt, has outlined significant changes to the UK’s tax landscape and measures aimed at fostering economic growth.
Let’s delve into the key announcements made during the statement.
1. Full Expensing Becomes Permanent
In a move described as the “biggest business tax cut in modern British history,” Chancellor Hunt has confirmed the permanent status of full expensing. Originally applicable for only three years, this tax break for investments in IT equipment, plant, and machinery aims to provide businesses with certainty and stimulate economic growth.
The permanent implementation is expected to offer a substantial annual tax cut of £11 billion, promoting business investment by £14 billion across the forecast period.
2. HMRC Receives £163 Million Boost to Tackle Debt
To enhance debt collection activities, HMRC is set to receive an additional £163 million, marking a 30% increase in specific funding. The investment is aimed at expanding HMRC’s debt management resource, with a focus on supporting individuals and businesses struggling to pay their tax debts.
The government anticipates an extra £5 billion in taxes collected over the next five years as a result of this funding boost.
3. National Insurance Cut by 2%
One of the headline announcements is the 2% reduction in the rate of employee National Insurance, bringing it down to 10%. This cut, effective from January, is expected to deliver a £450 annual tax reduction for the average worker earning £35,400.
Chancellor Hunt emphasised the government’s commitment to reducing “high employment taxes” and stated that the move would benefit 27 million people in the public and private sectors.
4. Small Business Rates Frozen
A support fund of £4.3 billion over five years has been allocated to small businesses, accompanied by a freeze in the small business multiplier at 49.9p for the next tax year. The government aims to aid small businesses by extending the freeze on the multiplier and extending the 75% Retail Hospitality and Leisure relief.
Additionally, measures to address late payments in large government contracts have been introduced, requiring proof of invoice payments within specified timeframes.
5. Enterprise Investment Scheme Extended
Legislation will be introduced to extend the lifetime of enterprise investment schemes (EIS) and venture capital trusts (VCT) for at least 10 years. The extension aims to continue supporting startups and SMEs in accessing growth capital.
While welcomed, some critics questioned why the sunset clause had not been completely removed, expressing concerns about potential uncertainty in the future.
6. Self-Employed Class 2 NICs Abolished
Chancellor Hunt has abolished Class 2 National Insurance contributions for self-employed workers and reduced the rate of Class 4 NICs. Starting from the new tax year on April 6, the £3.45 weekly payment for Class 2 NICs will be scrapped.
Additionally, Class 4 NICs for the self-employed will see a reduction from 9% to 8% from April 2024. The move is part of an effort to simplify the tax system and provide relief for the self-employed.
7. R&D Relief Changes (2024)
An overhaul of R&D relief is scheduled for April 2024, entailing the merger of two systems and a reduction in the SME intensity threshold from 40% to 30%. This adjustment is expected to enable around 5,000 additional SMEs to qualify for R&D tax relief. Furthermore, rates for loss-making companies will decrease from 25% to 19%, accompanied by a drop in thresholds from 40% to 30%, effective from April 1, 2024.
To provide a safety net, a one-year grace period will be implemented for companies falling below the 30% threshold, ensuring relief for the subsequent year. Profitable businesses’ credit rates will see a reduction to 15%, while loss-making entities will face a 16.2% rate. By the 2028-2029 period, these changes are anticipated to incur a cost of £280 million annually.
8. Property Announcements (Chancellor Jeremy Hunt)
To invigorate new home building, a £110 million investment over the next two years is earmarked, aimed at unlocking 40,000 homes. Addressing planning backlogs, £32 million will be allocated, fostering the development of housing quarters in Cambridge, London, and Leeds. Additionally, a substantial £450 million will be directed to the local authority housing fund, facilitating the delivery of 2,400 new homes for Afghan refugees and alleviating homelessness pressures.
The government plans to conduct a consultation exploring new permitted development rights, allowing the division of any house into two flats, contingent on the exterior remaining unaffected. The Mortgage Guarantee Scheme, encouraging lenders to offer mortgages with a 95% loan-to-value, has been extended until June 2025.
The cap on Local Housing Allowance will be elevated to the 30th percentile, providing support to 1.6 million households. In critique, Shadow Chancellor Rachel Reeves points out the “Tory mortgage penalty,” citing increased payments for re-mortgaging. There are also calls for simplified house conversion to stimulate private rentals and foster the creation of appropriately sized homes.
9. ATED Updates
Some changes to the Annual Charge for Annual Tax on Enveloped Dwellings (ATED) have also been made. The new Chargeable amounts for 1 April 2024 to 31 March 2025 are:
| Property Value | Annual Charge |
|---|---|
| More than £500,000 up to £1 million | £4,400 |
| More than £1 million up to £2 million | £9,000 |
| More than £2 million up to £5 million | £30,550 |
| More than £5 million up to £10 million | £71,500 |
| More than £10 million up to £20 million | £143,550 |
| More than £20 million | £287,500 |
Summary
These sweeping reforms and targeted tax cuts are integral to the government’s strategy for economic growth, job creation, and fostering a business-friendly environment. As the UK navigates the post-pandemic landscape, these measures aim to position the country for a resilient and prosperous future.
By providing businesses with long-term certainty, supporting individuals in financial distress, and incentivising investment, the Autumn Statement sets a robust foundation for the nation’s economic recovery.
