Autumn Statement 2023
Posted on 26th November 2023
The Chancellor delivered his Autumn Statement on 22 November 2023. The Autumn Statement was billed to be for Growth aimed at building a stronger and more resilient economy. He highlighted that the plan is to “unlock growth and productivity by boosting business investment by £20 billion a year, getting more people into work, and cutting tax for 29 million workers”.
We have become quite used to u-turns over the past few years (!) so we now take a few days to read, digest and process the updates before we write up our thoughts. Our blog covers the key headlines and you can download our full Autumn Statement Summary here.
"Full Expensing" Deduction - don't be fooled by this one!
The new ‘Full Expensing’ deduction announced from 1 April 2023 and originally intended to last until 31 March 2026 will be made permanent through legislation in the Autumn Finance Bill to remove the 2026 end date. The relief allows companies to claim 100% first-year deduction from profit before tax (50% for special pool rate) on qualifying new main-rate plant and machinery investments.
This was a great headline grabber with the Chancellor, Jeremy Hunt declaring his full expensing policy as the “largest business tax cut in modern British history” during his Autumn Statement to MPs in the House of Commons.
Our thoughts - Don't be fooled! - businesses have been able to "fully expense" most plant, machinery and computer equipment costs for years using the Annual Investment Allowance (AIA). The only thing Full Expensing does is remove the limit (previously £1m per year).
"Full expensing" does not mean that you can reclaim the full cost of any equipment. It means you can deduct the full cost of the equipment before your tax is calculated.
For example:
You buy a piece of kit for £25,000. This will reduce your profit by £25,000, saving you between 19-25% of tax (depending on your profit level). So you will spend £25,000 and save between £4,750 - £6,250 of tax.
National Insurance for self-employed*
*(doesn't include Limited Company Directors)
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 be abolished 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 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.
Our thoughts - great news for sole-traders, but what about Limited Company Directors?! This won't help them.
National Insurance for employees
Class 1 contributions for employees will be reduced from 12% to 10% from 6 January 2024.
Our thoughts - great news for employees, but again, what about Limited Company Directors?! This won't help them (we've run the numbers on this one!)
National Minimum Wage Increased
From 1 April 2024, the National Minimum Wage is increased to £11.44 an hour, for those aged 21 and over, with rates for those aged 20 and under also increased.
Our thoughts - this is great news for those on a lower salaries - but a potential headache for employers already struggling with increased overheads.
Additional Announcements
There are, as always, other announcements. Please see our full detailed write-up here. If you have any questions, please get in touch!
Written by:
Nicola J Sorrell - Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: Budget & Tax Rates
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