Autumn Statement 2023 Review: National Insurance, Full Expensing and Much More

November’s Autumn Statement brought some surprises, which was to be expected given it was likely the government’s last chance to bring some good financial news to the masses before a general election next year.

There were tax cuts for individuals and businesses, some clarifications to existing processes like IR35, and a lift in minimum wage for workers. On the face of it, it was a positive Statement - but does that actually translate into more money in everyone’s pocket?

Let’s take a look in more detail at the proposals announced in this year’s Autumn Statement - and see whether they actually make a difference to people's and businesses’ bottom lines. Here’s the latest.

Autumn Statement for individuals

The headline announcement was that Class 1 National Insurance will drop from 12% to 10% starting 6 January 2024. Anyone who is employed by a company pays this tax, so needless to say, it was a popular announcement.

The Chancellor also announced that the flat-rate Class 2 National Insurance will be abolished starting from the new 2024 tax year for sole traders and entrepreneurs. Class 4 National Insurance, which only applies if you earn over £12,570 and are self-employed, will also fall from 9% to 8%.

The idea of a ‘pension pot for life’ was also floated in recognition that people move jobs far more often than they used to - making pension admin a nightmare. A consultation on the proposal is expected in due course, so anyone hoping not to juggle multiple pension accounts still has some time to wait.

Autumn Statement for businesses

In some excellent news for companies and what Chancellor Jeremy Hunt called the “largest business tax cut in modern British history”, the government made ‘full expensing’ of capital investment, such as plant and machinery, permanent. The 100% tax relief was meant to end by 2026.

It’s good news for businesses because of the predicted annual investment into the UK expected off the back of the new rules, with the Office of Budget Responsibility previously predicting an extra £6 billion on average until 2026. The UK is also one of only a few OECD countries to offer this benefit, making it a more attractive country to do business with.

The national minimum wage saw a big jump to £11.44 an hour from April 2024. This is great news for employees, but businesses worried about the increase should speak to an accounting professional to see how they can make cuts elsewhere.

An interesting one for landlords was that the government would introduce a new permitted development right to convert a house into two flats, so long as there is no alteration to the property's exterior. This could help create more housing and might be seen as throwing a bone at landlords hammered by a harsher tax regime and spiralling mortgage interest rates.

There wasn’t much in the way of support for small businesses other than that the 75% business rates discount for hospitality, retail and leisure companies will be extended for another year, costing £4.3 billion.

Other Autumn Statement announcements

One stand-out part of the Statement for us accountants was Making Tax Digital for income tax is getting simplified, having already pushed back its implementation date to April 2026. Having listened to feedback from accountants, the government has decided to remove the End of Period Statement requirement, change the quarterly updates to a cumulative basis and let taxpayers be represented by more than one tax agent.

This is a big win for any taxpayer registered for Self Assessment and the accounting profession well ahead of its full roll-out in a few years. It’s a great sign the government is committed to making the new system as effective as possible - and BXD Accounting is ready for when the time comes!

As for IR35, which has been on a rollercoaster ride of announcements and u-turns for the last couple of years, the Chancellor confirmed some small changes are coming to the system in the form of fairer PAYE calculations. Hopefully, this will make life easier for businesses and contractors across the UK.

Final thoughts

Nobody is ever completely happy with the Autumn Statement, but there were some generous tax cuts given away, considering the UK is still recovering from the pandemic and risks toppling into a recession in 2024.

While the headline news was the reduction in income tax for almost every taxpayer, there were quite a few bonuses for companies - and full expensing being made permanent is a clear signal that the UK is open for business.

At BXD Accounting, we specialise in turning complex financial landscapes into clear, actionable strategies for small businesses like yours. Get in contact with us today for a free consultation to see how we can help.