Autumn Statement 2023
Jeremy Hunt’s Autumn Statement was largely a political posturing exercise in anticipation of an election. He has attempted to appease the right by toughening up on the long term unemployed and to placate the left by increasing Universal Credit in line with September’s rate of inflation rather than October’s lower rate.
The headline National Insurance Contributions (NIC) cuts are welcome for workers but with the continued freezing of the Personal Allowance and Income Tax rate thresholds, the tax burden remains high.
For those with Limited Companies with profits in excess of £50,000, they will now be paying Corporation Tax at up to 25% and so it was pleasing for Hunt to confirm that the ‘Full Expensing’ regime has been made permanent, effectively allowing unlimited upfront tax relief on the purchase of new qualifying plant and machinery by companies; a particularly welcome announcement for larger farming companies with a significant annual machinery spend.
Let’s take a closer look at how these announcements, coupled with previously announced changes coming into force from April 2024, may affect you and your business:
Individuals
National Insurance Contributions
Class 2 NICs, which are currently a flat rate of £3.45 per week, are set to be abolished from April 2024, saving self-employed individuals around £180 per year. Those with profits of less than £6,725 per year will be able to continue paying voluntary contributions to ensure entitlement to benefits in the future such as State Pension and Maternity Allowance.
Class 4 NICs, levied on trading income of the self-employed, will be cut from 9% to 8% from April 2024.
Class 1 NICs paid by employees will be cut from 12% to 10% from 6 January 2024, a tax cut of over £450 per year for the average worker on £35,400 salary.
Income Tax - Personal Allowance and Thresholds
The Personal Allowance and tax thresholds remain frozen until April 2028.The Personal Allowance is fixed at £12,570 and the higher rate tax threshold continues to be £37,700, with the 40% higher tax rate only applying to income in excess of £50,270 in most cases.
The threshold for the 45% additional rate of tax was dropped from £150,000 to £125,140 from April 2023 and will continue at this level.
Whilst there are no changes to the dividend tax rates, the Dividend Allowance of £1,000 will reduce to £500 from April 2024, as previously announced.
Capital Taxes
As announced in the Spring Budget, the Capital Gains Tax (CGT) annual exempt amount will reduce further from April 2024 from £6,000 to £3,000.Even modest disposals may now therefore be caught by CGT.
Inheritance Tax thresholds remain frozen at their current levels, with the Nil Rate Band at £325,000 and the Residence Nil Rate Band at £175,000, despite pressure to increase these thresholds.
Companies
Corporation Tax
Corporation Tax rates remain unchanged from their current levels, with Corporation Tax charged at 19% on profits up to £50,000 and profits above that level suffering tax at 25%, albeit with a tapered rate for profits between £50,000 and £250,000, allowing for a gradual increase in the overall effective rate of tax, summarised as follows:
Profits (Tax rate)
Up to £50,000 (19%)
Profits £50,000 - £250,000 (26.5%)
Over £250,000 (25%)
A company with taxable profits of £100,000 would therefore suffer a Corporation Tax liability of £22,750, an effective tax rate of 22.75%.
Capital Allowances
The Full Expensing Regime for companies was introduced in April 2023, allowing unlimited upfront tax relief on the purchase of new (not second hand) qualifying plant and machinery. Hunt has confirmed that this regime will now become permanent, whilst the £1m Annual Investment Allowance limit will continue to apply to the purchase of plant and machinery that doesn’t qualify for the Full Expensing Regime and to unincorporated businesses.
Victoria Paley ACA CTA
Senior Tax Manager
Victoria joined the practice in July 2019 having worked in accountancy and tax in the rural sector since 2010. As a Chartered Accountant and Chartered Tax Adviser Victoria spends most of her time advising family farming businesses on Capital Gains Tax and Inheritance Tax matters primarily in relation to succession planning and capital transactions.
Outside of work Victoria spends most of her time running around after her two young children and riding her horse. Having always loved to travel, Victoria hopes to resume exploring the world with her family once the children are a little older!