Yesterday, Jeremy Hunt, the Chancellor of the Exchequer, presented the anticipated outlook for the UK economy, emphasizing the government’s focus on five key areas: reducing national debt, cutting taxes to reward hard work, supporting British businesses, developing sustainable energy sources domestically, and delivering top-notch education.
While the Chancellor spared us the exhaustive details of the ‘110 measures’ during his speech, interested readers can delve into Treasury documents for the specifics behind the statement. Many political and economic analysts had predicted alterations to National Insurance Contributions, changes to Inheritance Tax, and reductions in business taxes. They accurately predicted two out of three.
Key Announcements
For the contracting industry and the wider working population, the key announcements were as follows:
- A cut in Employee National Insurance rates from 12% to 10% effective January 6, 2024, with no change in Employer’s National Insurance rates.
- Abolition of Class 2 National Insurance Contributions for the self-employed from April 2024 (currently £192 p/a), though voluntary contributions can still be made for benefits.
- A reduction in Class 4 National Insurance Contribution for the self-employed from 9% to 8%, starting April 2024.
- Regarding IR35 (Off-Payroll Working), the government will legislate in the Autumn Finance Bill 2023 to allow clients to offset liability under the rules with amounts already paid by the contractor, including corporation tax.
- An increase in the National Living Wage from £10.42 to £11.44.
- A 10% hike in tobacco duty, while alcohol taxes remain frozen until August 2024.
- Businesses investing in capital equipment, IT, etc., will welcome the permanent establishment of ‘full expensing’ for certain capital equipment. Business Rate Relief has also been extended for many small retail and hospitality businesses.
While observers expected reforms to state benefits, the Chancellor confirmed that the state pension ‘triple lock’ would apply at 8.5% from April 2024. Universal Credit and Disability Benefit will rise in line with inflation at 6.7%. In a bid to encourage employment, measures will be taken against welfare recipients not securing a job for 18 months, possibly leading to benefit cessation.
Additional Measures
Notably absent were references to Umbrella industry reforms. However, additional measures included:
- Increased funds for HMRC to streamline debt management, focusing on Construction Industry fraud and supporting strong measures against tax avoidance.
- A commitment to HMRC reviewing and clarifying their position on tax relief for training costs incurred by the self-employed.
- Reforms and incentives to encourage local authority planning applications.
- Potential pension fund reforms allowing individuals to have ‘one pension pot for life.’
- Changes to the Research & Development (R&D) scheme to stimulate investment in key strategic industries like life sciences, aerospace, and green energy.
The Autumn Statement held no major surprises, possibly influenced by the upcoming general election. We may find that if inflation continues to fall and tax revenues continue to rise, the Spring Budget of 2024 may reveal more substantial initiatives.