As I flagged here, I’m sure we were all rapt with interest at Jeremy Hunt’s Autumn Statement. In fairness, as I write this before reading tomorrow’s newspaper headlines, it does look as if the Chancellor pulled more than one rabbit our of the hat, writes David Little, a partner in our Corporate and Commercial Law team.
You can read all the detail of the Statement here, but the papers will mostly focus on these highlights from the Treasury’s press release. The Chancellor had lots to say about work and welfare reform, but as a Commercial lawyer it was the tax and business incentives that caught my attention.
Tax
With inflation halved and debt forecast to fall, the government aim now is to incentivise work as part of its long-term plan to grow the economy.
- The main rate of Employee National Insurance will be cut by 2 percentage points from 12% to 10%, coming into effect from January 2024 – delivering the benefit of a tax cut quickly for 27 million workers.
- The combined rate of income tax and National Insurance for employees paying the basic rate of tax will therefore fall from 32% to 30% – the lowest combined basic rate since the 1980s.
- The rate of Class 4 NICs on all earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8% from April 2024.
- The weekly Class 2 NICs – the flat rate compulsory charge which is currently £3.45 paid by self-employed people earning more than £12,570 – will effectively be abolished, with no-one required to pay from April 2024. Access to contributory benefits will be maintained and those currently paying voluntarily will still be able to do so at the same rate.
- The cuts to Class 4 and Class 2 together amount to a tax cut of £350 a year for the average self-employed person on £28,200, with around 2 million individuals to benefit.
Business
Measures to back British businesses big and small are aimed at removing barriers to investment and help to bridge the productivity gap between the UK and its G7 peers – unlocking £20 billion extra business investment per year over the next decade, according to Mr Hunt.
- Permanent Full Expensing will create the certainty that businesses need to confidently invest for less. A company can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments, meaning that for every pound invested its taxes are cut by up to 25p.
- A business rates support package worth £4.3 billion over the next 5 years will help high streets and protect those small businesses that are the backbones of communities. This includes a rollover of 75% Retail, Hospitality and Leisure relief for 230,000 properties and a freeze to the small business multiplier, which will protect around 90% of ratepayers for a fourth consecutive year.
- Pension reforms, including through establishing a new Growth Fund within the British Business Bank, will help unlock an extra £75 billion of financing for high-growth companies by 2030 while providing an extra £1,000 a year in retirement for the average earner saving from 18.
- SMEs will be supported with tougher regulation on late payers to improve prompt payments, the expansion of Made Smarter in Great Britain and continued funding for Help to Grow.
- The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme will be merged from April 2024, simplifying the system and boosting innovation in the UK.
- The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30%, benefiting a further 5,000 SMEs.
- The Climate Change Agreement Scheme will be extended, giving energy intensive businesses like steel, ceramics and breweries around £300 million of tax relief every year until 2033 to encourage investment in energy efficiency and support the Net Zero transition.
At first pass this all looks very generous, both to business and the individual. You might almost think we were being softened up for a general election.
Contact our Corporate & Commercial team
David Little is a Partner at Bishop & Sewell in our expert Corporate & Commercial team. If you would like to contact him, please quote Ref CB435 on either on either 07968 027343 / 020 7631 4141 or email company@bishopandsewell.co.uk.
The above is accurate as at 23 November 2023. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
