Today, Chancellor Jeremy Hunt delivered his Autumn Statement. The Chancellor said this Autumn Statement included 110 measures to “Help grow the British economy and back British business”, but were today’s announcements in line with this promise?

We’ve listened and analysed this afternoon’s key announcements and summarise below the key points that will impact business owners.

Full expensing and Corporation Tax

The recent Corporation Tax increase meant the UK is currently considered a high tax environment across the globe. However, today’s announcement of a permanent extension of ‘full expensing’ was welcome news to business owners and will help the UK have one of the G7’s most generous capital allowance regimes. Under current legislation, full expensing was due to end on 1 April 2026, but this relief has now been made permanent.

Full expensing allows companies to deduct the cost of qualifying plant and machinery from their taxable profits immediately. It has no expenditure limit, unlike the existing Annual Investment Allowance which has a £1m per annum cap. This relief helps to provide significant cash flow benefits for large scale investment, bringing forward relief into the year of investment rather than spreading it over the investment’s lifetime. Permanent full expensing will allow businesses more time to plan and cover higher value, longer term, staged investment.

R&D tax relief

The chancellor has confirmed the creation of a new “simplified” R&D tax relief combining existing R&D Expenditure Credit (RDEC) and SME schemes. The new merged scheme will apply for accounting periods beginning on or after 1 April 2024, following hot on the heels of a raft of R&D scheme changes which came into effect during 2023. Draft legislation was released in July, but certain changes have been made to the proposals.

The merged scheme will look similar to the RDEC scheme, with an above-the-line credit. Companies currently claiming under the SME scheme will see their effective benefit reduce. The new scheme will include a reduction of the rate at which loss-making companies are taxed within the merged scheme, from 25% to 19%, and will include the expected restriction in overseas expenditure. Rules will apply to ensure that R&D activities are not ‘double claimed’, but grant funded expenditure is not expected to be restricted by the new scheme.

The merged scheme will sit alongside the SME intensive scheme, a scheme for the most R&D intensive loss-making SMEs that was announced in the Spring Budget. This means there will still be two schemes, and R&D intensive SMEs carrying out R&D will need to carefully watch for when they drop out of the intensive scheme. The Chancellor did, however, lower the expenditure threshold for the additional support to 30% for accounting periods beginning on or after 1 April 2024.

With the reduced benefit, additional compliance now needed to claim the relief, HMRC’s current attitude to claims, and the complexities introduced, many SMEs will find the benefit of the relief intended to “drive innovation” has been significantly eroded by recent changes.

National Insurance

The cut to National Insurance had been widely reported prior to today’s statement.

Following the statement today the following changes to National Insurance were announced:

• Class 2 national insurance contributions for the self-employed to be abolished from 6 April 2024. Those with profits of at least £6,725 will receive a National Insurance credit without paying, and those with profits below £6,725 will be able to pay voluntary contributions to accrue qualifying years.
• A 1% cut to 8% in class 4 contributions, delivering further savings to the self-employed.
• A cut in the main 12% rate of employee class 1 national insurance. The rate will be cut to 10% from January next year.

To the disappointment of employers, no corresponding cut in the rate of employer’s class 1 national insurance was announced.

National Living Wage

Yesterday, prior to the Autumn Statement, it was announced that there would be a significant increase to the National Living Wage.

The national living wage will increase from April next year to £11.44 per hour. This increase will apply to those workers over the age of 23 but for the first time, will also apply to 21 and 22 year olds. This effectively gives a full-time worker over the age of 23 a rise of £1,800 a year and a 22 year old would see a rise of £2,300 a year.

18-20 year olds will also see an increase from £7.49 an hour to £8.60 per hour and apprentices’ wages rising from £5.28 per hour to £6.40 per hour.

Whilst this is great news for individuals, it will place increased costs on businesses and business owners should factor in these increased costs from April 2024.

Investment zones

Today saw updates to the locations of UK investment zones, which are targeted at driving growth in ‘key future sectors’ including green industries, digital technologies, life sciences, creative industries and advanced manufacturing.

There was an announcement prior to the Statement that these tax advantages within the new ‘Investment zones’ will now last for ten years rather than five.

An announcement was also made to increase the current 12 UK investment zones. With additional investment zones added in West Midlands, East Midlands, Greater Manchester and Wrexham and Flintshire.

Business rates relief

Business groups had urged Chancellor Jeremy Hunt to use the Autumn Statement to look at business rates relief. The business rate support package, worth £4.3bn over the next five years, will include an extension of 75% relief for Retail, Hospitality and Leisure sectors and a freeze to the small business rate multiplier for a further year.  This will no doubt come as welcome news to these businesses still in recovery.

Pensions

The Chancellor announced a consultation will take place on giving savers a legal right to require a new employer to pay pension contributions into their existing pension policy, meaning people can move to having one pension pot for life.  However, this will be more work for employers if this comes into force.

Other announcements

Innovation: A further £500m in investment over the next two years, to fund more innovation centres. £4.5bn support over the five years to 2030 to attract investment in strategic manufacturing sectors including the automotive sector, aerospace, life sciences, and the green industry accelerator.

Infrastructure projects: A focus on an improvement in turnaround times for major business planning applications was announced. This will allow local authorities to recover the full costs of major business planning applications in return for being required to be guaranteed faster timelines.

Skills: A pilot scheme to increase in the number of apprentices in engineering and other key growth sectors via £50m of additional funding over the next few years.

Late payments: 30-day payment terms will automatically apply through the subcontract supply chain. Any company bidding for large government contracts should demonstrate they pay their own invoices within an average of 55 days, which will reduce progressively to 30 days.

Summary

What we didn’t see today were any significant announcements around Inheritance Tax, Capital Gains Tax or Income tax. However, there were a large number of changes announced including areas that will help the lower paid and encourage business investment going forward.

Download Full Autumn statement

How can you prepare for these changes?

Seeking advice following an Autumn Statement and before new tax changes take effect in April is key. How you plan for changes will depend on your individual and business circumstances.

With the tax and business landscape changing, now is an important time to consider your personal and corporate tax planning. Contact us today for further help and advice on tax planning for you and your business.