Chancellor of the exchequer Jeremy Hunt has unveiled what he calls "an Autumn Statement for growth", delivering "the biggest business tax cut in modern British history". The announcement was welcomed by the Federation of Small Businesses as "game-changing".
With inflation down, some much-needed fiscal headroom and a general election on the horizon, chancellor Jeremy Hunt has delivered an Autumn Statement designed to have wide appeal for taxpayers and business owners alike.
The headline news for taxpayers is a 2% cut in employee national insurance contributions, reducing the NIC rate from 12% to 10% from 6 January 2024. For the average worker earning £35,400 a year, that amounts to an annual tax cut of over £450.
Other key announcements include:
- The national living wage will rise to £11.44 from April 2024 and will be extended to 21-year-olds.
- The state pension will increase by 8.5%, from April 2024.
- Universal Credit and other working age benefits will increase by 6.7% in April.
For businesses, Hunt has promised 110 growth measures. The headline announcement for self-employed workers is the abolition of Class 2 National Insurance contributions, cutting tax for two million people from April 2024. In addition, Class 4 contributions will be reduced from 9% to 8%. Together these cuts are worth an average of £350 a year for those earning £28,000 a year.
Other key announcements for businesses include:
- "Full expensing" is to be made permanent, allowing businesses to claim 100% capital allowances on qualifying investment in IT equipment, plant and machinery.
- A business rates support package worth £4.3 billion over the next five years includes a rollover of 75% retail, hospitality and leisure relief for 230,000 properties and a freeze to the small business multiplier.
- Four new investment zones are to be created in Wrexham, Greater Manchester, and the west and east Midlands.
- SMEs will be supported with tougher regulation on late payers to improve prompt payments.
Good news for small businesses
"We are backing small business by freezing their business rates, extending retail, hospitality and leisure relief, abolishing compulsory Class 2 National Insurance payments and reducing Class 4 National Insurance by one percentage point in today's Autumn Statement for growth. Small businesses work so hard for us, so this government is working hard for them." Chancellor of the exchequer Jeremy Hunt.
This Autumn Statement has been generally well-received by business groups. Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said: "Jeremy Hunt has today taken very welcome action on late payments, small businesses' rates, and self-employed taxation. This game-changing small business package shows the prioritisation of pro-growth measures where they will do most good."
Shevaun Haviland, director general of the British Chambers of Commerce (BCC), said: "We are pleased the chancellor has listened to our calls to help businesses deal with the current economic challenges. Today's statement provided some welcome remedies at a time when businesses of all sizes need certainty and security from the government in the difficult months ahead."
Autumn Statement 2023: Small business reactions
Andy Chamberlain, director of policy, IPSE: "We're pleased the chancellor has recognised the vital contribution of the self-employed sector to the UK economy, backing this with a cut to Class 4 national insurance. The abolition of Class 2 NI is a welcome simplification and will particularly benefit the self-employed on low incomes. Whilst it's a welcome relief to feel there is some support on offer from government, the self-employed sector is still reeling from gaping gaps in support during the pandemic and the implementation of the off-payroll working rules, which have had a devastating impact on hundreds of thousands … the government still has much more to do to win back the support of the sector."
Tina McKenzie, FSB policy chair: "When it comes to late payment, business rates and self-employed tax, it is unquestionably clear that the voice of small business has been heard today. This game-changing small business package shows the prioritisation of pro-growth measures where they will do most good, while getting the best bang for the taxpayer buck."
Roan Lavery, co-founder and ceo of FreeAgent: "There's a lot of good news for small businesses in today's Autumn Statement - not least the surprise announcement that Class 2 National Insurance will be abolished. It's also encouraging to see that the government is starting to take the issue of late payment seriously … However, I would have liked to see the chancellor be much bolder about the late payment issue by giving greater powers to the Small Business Commissioner to clamp down on all late payers or by mandating the Prompt Payment Code. Nevertheless, this is still the most positive Autumn Statement or Budget that there has been for small businesses in quite some time."
Tom Minnikin, partner at tax firm Forbes Dawson: "Obviously, this will be welcome news for the employed and self-employed, who will benefit from paying lower National Insurance going forward. However, the measure does nothing to help company owners who typically remunerate themselves via dividends as opposed to salary."
Jonathan Andrew, ceo of Bibby Financial Services: "We welcome the permanent adoption of 100% full expensing on qualifying capital spending … this will give SMEs a massive confidence boost and underpin their resilience. It presents an opportunity for SMEs to do something different to stay ahead of the competition, whether by investing in cutting edge equipment that improves productivity or by pivoting their business offering."
Round up of the main announcements
- Capital allowances: full expensing will be made permanent. After 1 April 2026 investments in qualifying plant and machinery will continue to qualify for a 100% first-year allowance for main rate assets, and a 50% first-year allowance for special rate (including long-life) assets. Cars, leased assets and second-hand assets will be excluded.
- Energy-Saving Materials VAT Relief: the list of qualifying technologies will be expanded from February 2024 to includetechnologies such as water-source heat pumps.
- Business rates: the small business rate multiplier will be frozen for another 12 months at 49.9p. The standard multiplier will be uprated to 54.6p.
- Business rates: the 75% discount on business rates up to £100,000 for retail, hospitality and leisure businesses will be extended for a further 12 months.
- Annual Tax on Enveloped Dwellings (ATED): will be uprated by 6.7% for the 2024/25 charging period.
- Van Benefit Charge and Car and Van Fuel Benefit Charges: will be held at 2023/24 rates for a further year.
- R&D tax reliefs: the qualifying expenditure threshold for loss-making businesses will be reduced from 40% to 30%. There will also be a one-year grace period for businesses that fall below the 30% qualifying expenditure, so they continue to receive relief.
- R&D tax reliefs: the Research and Development Expenditure (RDEC) and SME schemes will be merged for accounting periods beginning on or after 1 April 2024. The notional tax rate will be aligned at 19%.
- Self assessment: individuals who only pay tax through PAYE will no longer be required to submit as self assessment tax return from 2024/25.
- National Insurance: Class 2 NICs paid by the self-employed to be abolished entirely from April 2024. Class 4 NICs will also be reduced by 1% from April.
- National Insurance: Class 1 NICs for employees cut from 12% to 10% from 6 January 2024.
- National Insurance: employers’ NICs relief for qualifying veterans will be extended for a further year.
- Pensions: new state pension to increase by 8.5% from April 2024 rising to £221.20 per week.
- Pensions: there will be a new legal right for employees to require employers to pay their contributions to an existing plan, so that all savings can be consolidated.
- Vehicle Excise Duty: VED rates for cars, vans and motorcycles will increase in line with RPI from 1 April 2024. VED for HGVs and the HGV levy will be held at 2023/24 rates.
- Alcohol Duty: duty for all types of alcohol frozen until 1 August 2024.
- Tobacco Duty: duty on all tobacco products will increase by RPI + 2% while hand-rolling tobacco will increase by RPI + 12% from 6pm on 22 November 2023.
- National Living Wage: From April 2024, NLW and NMW will increase. The hourly rates will be: £11.44 for those aged 21 and over (previously only payable to those aged 23 and over); £8.60 for 18-20-year-olds; and the rate for 16-17-year-olds and apprentices in the first year of their apprenticeship will increase to £6.40 an hour.
- Enterprise Investment Scheme (EIS) and Venture Capital Trust: the existing sunset clauses will be extended for a further ten years to 2035.
- Planning: local authorities in England will offer guaranteed accelerated planning decisions in exchange for the payment of a fee. The full costs of the planning applications will be refunded if the application deadline is not met.
- Long-term unemployment: those still seeking work after 18 months will have to take part in a mandatory work placement. Those who do not engage with the work search process for six months will lose their benefits.
Written by Rachel Miller and Fiona Prior.