Phil Stevens, Head of Tax at Burgis & Bullock, provides his immediate reaction to the Autumn Statement which was delivered by Jeremy Hunt today (22/11/23).
Burgis & Bullock’s team will be sharing a full analysis of the announcement and what it means for businesses in the coming days.
We weren’t expecting Jeremy Hunt to announce 110 growth measures – there will without doubt be benefits for business and workers, but is it enough? The jury is still out.
The simplification and reform of taxes for the self-employed is long overdue. Class 2 NIC has been outdated for a very long time and it is about time that no self-employed person is required to pay it. In real terms the benefit is around £190 a year. When you also include the 1% drop for Class 4 NIC on self-employed profits (a maximum saving of approximately £370), whilst they aren’t huge savings, they are a step in the right direction.
Our ears also pricked up at the mention of the Chancellor’s promise to pledge extra resources to support HMRC. There are major issues with delays in the system and support is needed to improve efficiency of operations.
Further plans were also revealed to merge the R&D Expenditure Credit and SME Scheme from April 2024 – this would mean loss making companies are taxed within a merged scheme at 19% and the threshold for additional support for loss-making SMEs lowered by 30%.
However, there was no mention of the recently tightened conditions around applications being altered, and the current system is certainly discouraging some businesses from applying. It would have been nice to have seen some acknowledgement of those challenges.
Locally in Warwickshire we have a thriving cluster of businesses in the creative industries and those industries will be pleased to hear the government intends to boost the already beneficial tax reliefs further.
This will enable businesses, for example those in Silicon Spa in Leamington, to continue their great work.
We were again surprised that there was no mention of Inheritance Tax reform, or even a consultation. This has been subject to much repeated rumours over the last few years and we will most likely have to wait until the Spring Budget for further announcements.
There were a few announcements that were great for small businesses, for example the news that SMEs will be supported with tougher regulation on late payers, which is brilliant news.
The measure means that late payers will be unable to bid for large government contracts, and will incentivise those larger organisations to be more compliant and timely with paying contractors.
Small businesses can often be hesitant to chase large businesses for payment and this can be at the detriment of the future of the business. This measure will help to promote certainty and growth for small businesses.
It is not only small businesses that will benefit; the announcement of permanent Full Expensing will benefit large businesses that typically spend heavily on capital items such as IT, plant and machinery.
This will lead to further investment and innovation – which in turn brings more jobs and economic prosperity.
This, according to the Chancellor, is a £11 billion tax cut, and companies investing in the UK will reduce their tax burden by up to 25p for every £1 they spend on plant and machinery.
The extension of the business rates relief of 75 % for retail, hospitality and leisure businesses is necessary but could have gone further.
Owners of these businesses have seen costs soar across the board, so a further reduction to offset these costs for an increasingly struggling sector would have been welcome.
Jeremy Hunt’s big announcement was the National Insurance cut for employees from 12% to 10%.
There is merit in any measure which incentivises people to work and play an active role in our economy, but again (and similarly to the cut for the self employed), the maximum saving is £750 per annum; when compared to the increasing costs of living, the real term impact on spending power of individuals will be limited.
This felt like a deeply political move, with the government having one eye on a general election next year.
In summary, this was a statement full of surprises, with small tax cuts for most workers, as well as help and incentives for many businesses of varying sizes.