A Summary of the Autumn Statement
In the Chancellor’s “Autumn Statement for Growth,” some substantial changes were unveiled, impacting tax and financial plans for both individuals and businesses.
National Insurance
For the self-employed: from 6 April 2024, it was announced that sole traders will be relieved from flat rate Class 2 contributions, saving £3.45 weekly or £192 annually. Additionally, the class 4 rate, payable on profits between £12,570 and £50,270, decreases by 1% from 9% to 8%, resulting in an average annual saving of £350. Sole traders will continue to receive access to contributory benefits, such as the state pension. Where profits are between £6,725 and £12,570, entitlement to contributary benefits will be maintained. Those sole traders with profits under £6,725 will continue to be able to pay a voluntarily National Insurance contribution to get access to contributory benefits.
Employee NI cuts: From 6 January 2024, the main rate of Class 1 National Insurance Contributions (NIC) is dropping from 12% to 10%.
National Minimum Wage and National Living Wage Increases
From 1 April 2024:
The National Living Wage (NLW) will increase by 9.8% from £10.42 to £11.44 an hour. This represents an increase of over £1,800 to annual earnings. The National Living Wage had previously been payable to those aged 23 and over and will now apply for eligible UK workers across the UK aged 21 and over.
National Minimum Wage (NMW) rates for 18–20-year-olds, and 16-17-year-olds and apprentices, will also see an increase to £8.60 and £6.40 respectively.
Capital Expenditure for Companies
A previously announced reform whereby companies can obtain tax relief on capital expenditure incurred from 1 April 2023 to 31 March 2026 has now been made permanent. This means that 100% of qualifying expenditure made by companies (or “full expensing”) will continue to be fully deductible from taxable profit. A no doubt welcome announcement given the continuation of the relatively recent increase of the main rate of corporation tax to 25%.
State pension increase
The Government plans to maintain the State Pension’s Triple Lock and will increase the State Pension by 8.5% from April 2024, taking the full state pension from £203.85 per week in 2023/24 to £221.20 per week in 2024/25.
Research & Development
Additional tax relief is being provided for small and medium-sized enterprises (SMEs) with significant research and development (R&D) activities that are currently experiencing losses. The SME scheme initially reduced the repayable cash payment rate from 14.5% to 10%. However, in a recent announcement, the rules have been adjusted to benefit loss-making R&D intensive SMEs.
Previously, these SMEs could claim the higher cash payment rate if at least 40% of their total expenditure was dedicated to R&D. The recent modification relaxes this requirement, reducing the threshold from 40% to 30%. As a result, approximately 5,000 more R&D intensive SMEs will now qualify for the higher rate of cash payment.
To facilitate the transition, a one-year grace period is introduced. This means that companies falling below the new 30% threshold will still receive relief for one year. The eligibility for claiming expenditure will start from 1 April 2023, once the Autumn Finance Bill 2023 has received Royal Assent. The reduction in the intensity threshold and the grace period will be applicable for accounting periods beginning on or after 1 April 2024.
Other items
ISA and JISA contribution limits stay unchanged, with some proposed changes aiming to enhance flexibility.
Inheritance Tax and Capital Gains Tax rates and thresholds remain unchanged.
Personal tax thresholds, exemptions, and allowances remain unchanged and, in many cases, frozen until 5 April 2028.