Autumn Statement 2023

Jeremy Hunt presented his Autumn Statement on 22 November, making it clear that his announcements would serve to support business and get Britain growing.

In what he termed an "Autumn Statement for Growth", amongst other things the Chancellor announced cuts to national insurance for both employees and the self-employed, a state pension triple-lock guarantee of 8.5% and a permanent extension of the full expensing capital allowance scheme.

Although there were hints at potential tax cuts coming next year, no specific measures were announced.

Set out below is a snapshot of the highlights which we feel may be of most relevance to our clients.

National Insurance Contributions (NICs)

On Earnings from Employment

Class 1 NICs

The main rate of primary class 1 NICs (paid by employees) is to be reduced by 2%, from 12% to 10%, from 6 January 2024. This will reduce the amount of NICs paid on earnings between £12,570 and £50,270 and provide employees who pay higher rate tax on their PAYE earnings with a saving of £754 per year.

The rate of secondary class 1 NICs (paid by employers) is to remain unchanged at 13.8% on all earnings over £12,570.

On Earnings from Self-Employment

Class 4 NICs

The main rate of class 4 NICs is to be reduced by 1%, from 9% to 8%, from 6 April 2024. This will reduce the amount of NICs paid on earnings between £12,570 and £50,270 and provide the self-employed who pay higher rate tax on their freelance earnings with a saving of £377 per year.

Class 2 NICs

Further savings are to be afforded by the effective abolition of class 2 NICs. These contributions are currently paid at a rate of £3.45 per week (£179.40 per year) by self-employed earners whose profits exceed £12,570 but the requirement to pay these contributions will cease to apply from 6 April 2024.

Class 2 NICs are the contributions which have historically afforded the self-employed access to contributory state benefits including the state pension and it has been confirmed that this will continue to be the case, hence this is not a complete abolition of class 2 NICs as has been reported in some publications. It has also been confirmed that self-employed earners with small earnings who pay class 2 NICs on a voluntary basis with a view to obtaining additional ‘qualifying years’ for future state pension entitlement purposes will be able to continue doing so.

Personal Tax

Expansion of the Cash Basis of Accounting

The cash basis of accounting will apply by default for self-employed earners, including those in partnership, from 6 April 2024.

As things stand, the default method for calculating profits of trading businesses is the accruals basis and in order to use the simpler cash basis, businesses have to opt in. The changes announced will make the cash basis the default method and businesses will have to opt to use the accrual basis if that is preferred.

Certain pitfalls of adopting the cash basis which have encouraged many businesses to continue using the accruals basis – including restrictions which apply on the deduction of interest and the utilisation of losses – are to be removed.

Extension of the Enterprise Investment Scheme (EIS) and the Venture Capital Trusts (VCT) Scheme

The income tax reliefs which are currently available for investments in EIS and VCT shares were due to cease being available for shares issued after 5 April 2025. This deadline is to be extended to 5 April 2035.

State Pension

The triple-lock is to be maintained, meaning that the state pension will be uprated in April 2024 in line with average earnings growth of 8.5%.

A pensioner in receipt of the full new State Pension will see their pension grow from £203.85 to £221.20 per week from April, while a pensioner who reached state pension age prior to 6 April 2016 will see their pension grow from £156.20 to £169.50 per week.

Corporate tax

Capital Allowances

‘Full expensing’ of expenditure by companies on plant and machinery, which offers 100% first-year relief on investment in new plant and machinery and 50% first-year relief on special rate assets (including integral features such as electrical systems) is to be made permanent. These reliefs, which are only available to companies and not unincorporated businesses, were originally planned to end on 31 March 2026.