Listening to the Chancellor’s Autumn Statement, it’s obviously aimed at winning votes. But that’s no surprise given there’s an election on the way.

After digesting the Government’s latest tax and spending plans, here’s my summary and reaction…

Autumn Statement 2023

The Chancellor Jeremy Hunt delivered his ‘Autumn Statement for Growth’ in the House of Commons yesterday.

Mr Hunt set out his plan to “unlock growth and productivity” by boosting business investment, getting more people into work, and cutting tax for millions of workers. The Government said it could cut taxes because inflation had “halved” and debt was “forecast to fall”.

And the Chancellor pledged to back British businesses through measures like removing planning “red tape”.

Key tax announcements

  • Main rate of Class 1 employee National Insurance cut from 12% to 10% from January.
  • Class 4 National Insurance contributions (NICs) for the self-employed reduced from 9% to 8% from April.
  • Class 2 NICs – paid by self-employed people earning more than £12,570 – abolished from April.
  • No changes to inheritance tax (IHT) and income tax.

Business

  • “Full expensing” – a company can now permanently claim 100% capital allowances on qualifying main rate plant and machinery investments.
  • 75% business rates discount for retail, hospitality and leisure businesses extended for another year.
  • Tougher regulation on late-payers to speed up payments for SMEs.
  • The existing R&D Expenditure Credit and Small and Medium Enterprise Scheme merged from April.
  • Rate at which loss-making companies are taxed within the merged scheme reduced from 25% to 19%, and the threshold for extra support for R&D intensive loss-making SMEs lowered to 30%.

Work and welfare reform

  • National Living Wage to increase from £10.42 to £11.44 an hour for eligible workers from April – with the age threshold lowered from 23 to 21 years old.
  • National Minimum Wage rates to increase for young people and apprentices: for people aged 18-20 to £8.60 an hour; for 16 and 17-year-olds and apprentices to £6.40 an hour.
  • Reforms to the Work Capability Assessment to ensure people who can work are supported to do so via the welfare system.

Pensions and benefits

  • Working-age benefits to increase by 6.7% in line with September’s inflation rate.
  • Maintaining of the ‘triple lock’. The full new state pension to rise to £221.20 a week from April.

Infrastructure and levelling up

  • £4.5 billion of funding for British manufacturers in the high-growth industries of the future, including £960 million earmarked for the Green Industries Growth Accelerator to support clean energy.
  • Three advanced manufacturing Investment Zones to be created in Greater Manchester, East Midlands, and West Midlands.
  • The Investment Zones programme and freeport tax reliefs to be extended from five years to 10 years.

Economic forecast

The Office of Budget Responsibility (OBR) delivered its revised forecasts for the economy and public finances alongside the Autumn Statement.

It said the economy had proved more resilient to the shocks of the pandemic and energy crisis than expected. However, it pointed out that inflation had also been more persistent and interest rates higher than in March.

The OBR said: “Higher inflation boosts tax revenues but also welfare benefits while higher interest rates push up debt servicing. But because departmental spending is left largely unchanged, this delivers a net fiscal windfall of £27 billion. The Chancellor spends virtually all of this on a 2p cut in NICs, permanent tax relief for business investment, and further welfare reforms, leaving debt falling by a narrow margin in five years.”

My reaction to the Autumn Statement

With an election looming it was inevitable the focus would be on good news rather than bad.

There are a number of sensible aims in the statement, including trying to clear the system of red tape. There’s a large tax take in the UK, so there’s clearly a big issue in terms of what the tax is spent on. Many governments have tried to cut the bureaucracy in our system and failed, so it remains to be seen how successful they’ll be.

National Insurance is a bizarre concept, in effect being a tax on being employed or employing people, so it’s helpful this burden is being eased. It makes sense to reduce National Insurance instead of income tax, which applies to both passive and earned income. There’s clearly an emphasis on “back to work” throughout the measures, so a significant drop in Class 1 and Class 4 NICs – and abolishing Class 2 – is a sensible move. (Class 2 probably costs more to administer than is collected!)

There was a lot of talk ahead of the announcements about a cut to inheritance tax, or even outright scrapping it. But such a decision would have been unlikely ahead of an election. Not least because the act of ending IHT would most probably mean capital gains tax would be charged on death, which might actually pull more people into the tax net.

Overall, it seems to be a balanced statement, but one that clearly has voters in mind, although not everyone will be happy with the measures.

But if a fraction of the goals is achieved, there’s a strong chance this could lead to growth and a much more efficient economy.

Watch this space…

Autumn Statement tax advice

For advice on the latest tax changes or how you can make the most of your money, talk to our team on 07813 434195 or email: stephanie.churchill@churchilltaxation.co.uk

AAT autumn budget events

Stephanie Churchill will be scrutinising the Autumn Statement at two events for the Association of Accounting Technicians: a webinar for AAT members on 30 November, and an in-person event for the Birmingham branch on 7 December. Click here to find out more.

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation