Autumn Statement Summary 2023 announcements that may affect our clients.

This was definitely a financial statement preparing for a general election. However, it is likely that there will still be another budget too in Spring 2024, ahead of the next general election.

There weren’t huge changes announced so most of the tax increases are hidden and come from the tax thresholds being frozen at a time of high inflation.

National Insurance (NI)

The rate of Class 1 NI paid by employees will fall from 12% to 10% from 6 January 2024. Thank you, Mr Hunt, for a mid-year payroll change!

However, the self-employed will need to wait slightly longer for their smaller NI reduction from 6 April 2024:

• The rate of class 4 NI will fall from 9% to 8%.
• Class 2 NI is now scrapped but can be paid voluntarily through your tax return at a rate of £3.70 per week to ensure eligibility for benefits if your income is below £6,725 per year.

All the other rates & thresholds remain the same.

Personal tax

Dividend allowance reduced from £1,000 to £500 from April 2024.

No change to income tax rates or any other personal tax allowances/thresholds, which are all frozen until April 2028.

Capital gains tax annual exemption (Tax-free limit) reduced from £6,000 to £3,000 from April 2024 but no change to the capital gains tax rates.

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes will be extended from an end date of 6 April 2025 to 6 April 2035. There are significant income tax and capital gains tax reliefs for investors in these products, but they aren’t for the faint-hearted!

Business

No changes to corporation tax rates.

Full expensing, i.e. 100% capital allowance on plant & machinery purchases and 50% capital allowance on “special rate expenditure”, has been made permanent. However, this doesn’t affect most of our small business clients, who would continue to utilise the Annual Investment Allowance of 100% on their first £1m of qualifying asset expenditure.

VAT registration threshold remains frozen at £85k until 1 April 2026.

The existing SME R&D scheme will be merged into the large company RDEC scheme for accounting periods commencing on or after 1 April 2024 unless you’re an R&D intensive small company (R&D expenditure represents at least 30% of your total expenditure from 1 April 2024). This represents a significant reduction to the tax credit that will be received, and it’s calculated in a different way too. Overseas subcontracting costs will also be excluded from the claim.

The National Minimum Wage is increasing to £11.44 from April 2024 for those over 21 (previously £10.42 for those over 23 so DO CHECK YOUR PAY RATES). This represents an increase of 9.8% unless you are aged 21 to 22, in which case it is 12.4%! The state pension is increasing by 8.5%, and benefits such as universal credit by only 6.7%.

Current business rate reductions in certain sectors, such as retail, hospitality & leisure, remain in place for 2024/25, and the small business multiplier will be frozen. You will be informed individually by your local council how this will affect your rates liability.

The government is listening to the late payments lobby (in which our accounting software partner Xero, has been heavily involved, providing small business statistics demonstrating the extent of the problem of unauthorised debt). From April 2024, any firms bidding for government contracts over £5 million will have to demonstrate that they pay their own supplier.

 

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