Autumn Statement 2023

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This week, Chancellor Jeremy Hunt presented his Autumn Statement with the underlying message that inflation is falling and public finances are stabilising, so focus is now being applied to reducing debt, cutting tax and rewarding hard work.

If you want some bedtime reading here is the link to our full detail on the main announcements, otherwise keep reading here for the headlines.


National Insurance Cuts

For employees

The main rate of Class 1 NICs will be cut from 12% to 10% from 6 January 2024. 

Over a full year, the average worker on £35,400 will receive a NIC reduction of over £450. Workers earning more than £50,270 a year will receive a NIC reduction of £754.

The Class 1 NIC rate will remain at 2% for earnings above £50,270 a year. 

There are no changes to the rate of employer’s Class 1 NICs, which remains at 13.8%.

For the self-employed

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4. 

  • Class 2 NICs is a flat rate sum of £3.45 a week in 2023/24 but no one will be required to pay the charge from 6 April 2024. 

  • The main rate of Class 4 NICs will be cut from 9% to 8% from 6 April 2024. Class 4 NICs will continue to be calculated at 2% on profits over £50,270.

Taken together these changes will result in an average self-employed person with profits of £28,200 saving £336 in 2024/25. 

Full Expensing - Tax Relief for expenditure on plant and machinery

If you’re not planning to spend over £1million on equipment then skip ahead to the next section as this won’t apply to you. 

The Annual Investment Allowance (AIA) is now permanently set at £1million. This means that businesses can claim tax relief at 100% on up to £1million of expenditure on qualifying plant and machinery (e.g. capital equipment). 

‘Full expensing’ is an additional and alternative relief for companies only. It allows unlimited 100% upfront tax relief on qualifying plant and machinery that is purchased in a new condition on or after 1 April 2023. There is also an associated 50% allowance for expenditure on certain types of plant and machinery that does not qualify for the full 100% (including space and water heating systems, for example). 

‘Full expensing’ was initially introduced in Spring 2023 and had an original end date of 31 March 2026. It has now been announced that it will be made permanently available. Described as the ‘biggest business tax cut in modern British history’ it must be noted that it will usually only benefit companies or groups of companies that have already utilised their £1million AIA. It is not available at all for unincorporated businesses, although the expansion of the cash-basis (see below) achieves a very similar effect for sole traders and partnerships.

Full expensing does come with some quite complicated rules on the amount of upfront relief and the calculation of tax charges that may apply when the purchased plant and machinery is sold. Please talk to us for more details.


Research & Development (R&D) Reliefs - Merging of the existing schemes

A new R&D scheme for limited companies will come into effect for accounting periods starting on or after 1 April 2024 merging the current R&D Expenditure Credit (RDEC) scheme (for larger companies) with the Small and Medium Enterprise (SME) scheme. 

There will also be a second new R&D scheme for ‘R&D intensive SMEs’.

Within the new rules there are new provisions in relation to:

  • Who can claim relief when companies contract out R&D activities;

  • The definition of qualifying expenditure, taking into account whether the R&D has been undertaken in the UK,

  • The qualifying criteria for ‘R&D intensive’ companies is planned to reduce from 40% to 30%

  • Restrictions on nominations and assignments of R&D relief payments.

Look out for our blog on the new merged scheme coming soon.

If you are claiming (or considering claiming) R&D reliefs and find you need support to both ensure compliance and to adopt the new rules and framework. Please get in touch with us.

National minimum wage (NMW)

The National minimum wage rates have been increased, from 1 April 2024 the minimum pay rates will be as follows:

National Living Wage (age 21 and over)       £11.44

18-20 year old rate                                           £8.60

16-17 year old rate                                           £6.40

Apprentice rate                                                £6.40

Business Rates

A new business rates support package worth £4.3 billion will be made available over the next five years to support small businesses and the high street. For 2024/25, the small business multiplier will continue to be frozen and the 75% Retail, Hospitality and Leisure business rates relief will continue to apply. 

The standard rate multiplier will be uprated in line with the September 2023 CPI of 6.7%.