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Autumn Statement
So... the Autumn Statement, what is it and how does it affect you and your business?
The Autumn Statement (and the Spring Statement) outlines how the government is going to spend (or not spend) the country’s money for the next financial year and outline any new policies around finances.
Since 2020, the country has been struggling and we have all seen the inflation and the cost of living increase over the past 3 years. The Chancellor begun his speech by saying the country has recovered faster than originally thought and the economy is going to keep growing over the next few years.
Jeremy Hunt then outlined 5 key areas he will be focusing on within this Autumn Statement: reducing debt, cutting tax and rewarding hard work, backing British business, building domestic and sustainable energy, and delivering world class education. We will breakdown what the first 3 key areas mean and how they may affect you and your business.
Reducing Debt
This one is generally more about the country than directly affecting businesses. Jeremy Hunt outlined that the government is on track to meet its debt and borrowing fiscal rules this year. Furthermore, he discussed decisions around spending to ensure the country's debt continues to fall.
Cutting Tax and Rewarding Hard Work
Cutting tax? Woohoo! Sounds great doesn’t it? Well let us look at what it really means…
For those who are self-employed and pay their Class 2 National Insurance Contributions (NIC), this is going to be completely abolished from the 6th of April 2024; though you can still choose to pay them on a voluntary basis.
So currently for the 23/24 tax year, any earnings over £12,570 you will pay class 2 NIC at £3.45 a week and 9% on any earnings up to £50,270 whereas for the 24/25 tax year only class 4 NIC will have to be paid on earnings between £12,570 and £50,270.
It is also worth mentioning that the Class 4 NIC rate will be decreased from the 6th April 2024 to 8%. The current rate for the 23/24 tax year is 9% so there will be a 1% decrease.
Below we have linked a table by MoneySavingExpert that outlines simply what you may end up paying in NIC for the next two tax years.
You can view this table here at: National insurance to be cut for millions of workers (moneysavingexpert.com)
Now, all this sounds great and Hunt made sure to use calculations that made it sound great too – but is it really? Well, for the low earners they are not going to see that much of a difference, in fact, may not see any at all - whereas what the government deem as an average self-employed worker earning £28,200 will pay £350 less in NIC than what they did last year.
For the employers:
- The next bit of tax news announced by Hunt was the 2% cut to class one NIC paid by employees – this cut will come into effect from 6th January 2024 rather than the start of the new tax year on the 6th April 2024.
- The National Living Wage will be increased to £11.44 from the 1st of April and the age threshold will be lowered from 23 to 21 year olds.
For those who receive state pension this will be going up to £221.20 a week from April.
Backing British Business
Super deduction: In 2021 the government introduced the ‘super deduction’ to incentivise business investment – at the spring budget 2023 the government said they will increase this for three years from April 1st 2023. This change, as announced by Hunt on the 22nd November 2023 will be made permanent, meaning businesses can continue to claim back 25p in corporation tax for every £1 spent on qualifying plant and machinery investments.
Business Rates: Small business rates multiplier will be frozen at 49.9p for a fourth year. Retail, Hospitality and Leisure Businesses will continue to receive 75% relief up to £110,000 per business in the 24/25 tax year also.
Summary
These are the main changes that will affect the businesses and sole traders we work with. If you want to know more about any of these changes and how they affect you directly, please don’t hesitate to contact us.
If you want to read more about the Autumn Statement, we have linked a few websites containing more information.
Autumn Statement 2023 (publishing.service.gov.uk)
Autumn Statement 2023: National Insurance Factsheet - GOV.UK (www.gov.uk)
National insurance to be cut for millions of workers (moneysavingexpert.com)
Autumn Statement: Martin Lewis and MSE analysis (moneysavingexpert.com)
5/2023: Autumn Statement business rates measures - GOV.UK (www.gov.uk)
Autumn Statement 2023 | Institute for Fiscal Studies (ifs.org.uk)
Spring Budget 2023
Chancellor Jeremy Hunt announced the Spring budget on the 15th March 2023; after a busy 2022 with three statements regarding budgets and spending for the UK, the spring budget was mainly focused on spending rather than tax announcements which were made in Autumn of 2022.
Although there were some announcements made that have caused questions to be raised about what this means for individuals with their own business and their finances, below, we will discuss changes announced in the Spring Budget 2023 and the affect they will have on self employed individuals and their businesses as well as any other significant changes announced in earlier statements.
You can also find the full report of the Spring Budget on the HMRC website here: https://www.gov.uk/government/publications/spring-budget-2023-overview-of-tax-legislation-and-rates-ootlar/spring-budget-2023-overview-of-tax-legislation-and-rates-ootlar
Corporation Tax Rate Increase
Corporation Tax must be paid by limited companies, any foreign companies with a UK office or branch and a club, co-operative or other unincorporated businesses (sports club or community group).
Corporation Tax is paid on investments, selling assets (for more than they cost) and doing business.
From April 1st 2023 Corporation Tax Rate will increase from 19% to 25% on profits over £250,000 and a marginal relief rate of 26.5% on profits between £50,000 and £250,000. For small companies with profits up to £50,000 the rate will be 19%. Click here for more information about marginal relief: https://www.gov.uk/guidance/corporation-tax-marginal-relief
Depending on the businesses accounting period, you may pay two different rates on tax, for example if a companies accounting period ends 30th September 2023 and your profits are over £250,000 then up to the 31st March 2023, you’ll pay the 19% rate and then for the remaining 6 months it will be the 25% rate.
“Super-deduction” for plant and machinery
Chancellor Hunt announced that there will be a super-deduction for businesses, encouraging them to purchase equipment. In simple terms there is no upper limit (the upper limit was up to 130%) on how much you can claim back as a tax deduction.
This will come into affect from April 1st 2023 for three years.
Find out more here: https://www.gov.uk/government/publications/full-expensing/spring-budget-2023-full-expensing
Personal Tax Rates to Remain
As announced in the Autumn 2022, personal tax rates are remaining the same, however there has been an increase in minimum wage rates. If you live and work in Scotland, the Scottish Parliament sets its own personal tax rates. Find out more about tax rates for Scotland, the rest of the UK and the minimum wage increase below.
Minimum Wage Rates: https://www.gov.uk/national-minimum-wage-rates
Personal Tax Rates: https://www.gov.uk/income-tax-rates
Personal Tax Rates in Scotland: https://www.gov.uk/scottish-income-tax
National Insurance Contributions
For employees and those who are self employed and pay their national insurance contributions (NIC) there has been no change.
Employers eligible for the Employment Allowance have a tax allowance for NIC of £5000 for the 23/24 tax year.
National Insurance Rates and Categories: https://www.gov.uk/national-insurance-rates-letters
Rates and Thresholds for Employers: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2023-to-2024
Pension Allowances
Big changes were announced in the Spring Budget Statement regarding pensions, the annual allowance you can deposit into a pension has increased to £60,000 from April 2023.
The tax free allowance that can be deposited into a pension has increased to £10,000 and the taper raised to £260,000 rather than £240,000.
Capital Gains Tax
Within the Autumn 2022 statement, it was announced that the exempt amount for capital gains tax would be cut to £6000 for the 23/24 tax year and then again to £3000 for 24/25.
This reduction is likely to mean more people are required to complete self assessment returns in order to report chargeable gains.
https://www.gov.uk/government/publications/reducing-the-annual-exempt-amount-for-capital-gains-tax
