AUTUMN STATEMENT 2023
by Nick Antoniou, FCCA of NA Associates LLP, Chartered Certified Accountants.
Introduction
Against the backdrop of a cost-of-living crisis, a near-stagnant economy and a looming election, the 2023 Autumn Statement was seen to reflect a pivotal moment in the UK’s economic trajectory.
As Jeremy Hunt stepped up to the dispatch box for his second Autumn Statement as Chancellor of the Exchequer, the nation’s attention was firmly fixed on potential tax cuts.
Main announcements
Personal changes
Hunt’s package of pay rises, tax cuts and extra support for jobseekers aims to make it easier and more rewarding for people to find work and stay employed. The Government also plans to introduce tougher benefits rules to incentivise more people to “get off benefits and move into work.”
National Living Wage rise
In line with the overarching theme of “making sure work pays”, the Chancellor announced he would raise the National Living Wage (NLW) from £10.42 to £11.44 per hour in April 2024. This marks the largest ever cash increase since the rate was introduced in 2016 and means a full-time worker on the NLW will earn more than £1,800 extra a year.
Hunt also unveiled plans to reduce the age threshold for the National Living Wage (NMW) from 23 to 21 and increase the minimum wage for 18 to 20-year-olds from £7.49 to £8.60 an hour, while the minimum hourly rate for apprentices is set to increase by over 20% from £5.28 to £6.40 an hour.
Class 1 National Insurance contributions
The Chancellor waited until the end of his speech to announce a 2% cut to the main rate of National Insurance – a move which is set to benefit 27 million people, from 6 January 2024.
This reduction will only apply to annual earnings between £12,570 and £50,270, meaning that the maximum saving is £754 a year, while the average worker on a £35,400 salary will be £450 better off.
Effects on individuals and businesses
While many individuals will take home larger pay packets thanks to the measures announced in the Autumn Statement, current threshold freezes are still pulling more people into higher tax bands.
Other personal announcements
Benefits
Universal Credit payments and other welfare benefits will be increased by 6.7% next April. This increment translates into an additional £470 a year for about 5.5m households.
Other changes to benefits were among Hunt’s most controversial, including:
- Incentivising work for benefits claimants: The Chancellor plans to push 200,000 people into work, focusing on the sick and disabled. This includes mandatory work placements and stopping benefits for those not actively seeking employment.
- Stricter benefits sanctions: There will be harsher benefits rules and sanctions, particularly affecting people who cannot work due to disabilities, illness, or care responsibilities.
- Impact on disabled and vulnerable individuals: The Government plans to tighten the Work Capability Assessment, making it more challenging for individuals to access additional money and protection from benefit sanctions.
Pensions triple lock
Despite reports to the contrary, the Chancellor remained committed to the ‘triple lock’ on pensions, meaning that pension payments will rise by 8.5% next April.
Under the triple lock, the Government is supposed to increase the state pension each tax year by either the previous September’s rate of inflation (6.3%), the rate of wage growth (8.5%), or 2.5%, whichever is higher.
Housing and private rents
In response to the housing crisis, the local housing allowance rate will be increased to cover the lowest 30% of market rents. This measure is expected to benefit 1.6m households, with an average support of £800 per household next year.
Business changes
The Autumn Statement intends to bolster British businesses of all sizes to eliminate investment barriers and close the productivity gap with other G7 nations.
The long term view is to unlock £20bn in additional business investments annually for the next decade. The plan is set to “reward hard work” and includes 110 growth measures for businesses.
Here are a few of the headline announcements.
Full expensing for businesses
Hailed as a key feature of what the Chancellor called “the largest business tax cut in modern British history,” one of the most significant business announcements was Hunt’s decision to make the full expensing scheme permanent.
Full expensing provides 100% first-year relief to companies on qualifying main rate plant and machinery investments, including IT equipment. Initially introduced in the Spring Budget 2023, the scheme was due to expire in March 2026.
The Government predicts this will unlock an additional £14bn in investment over the OBR’s forecast period, helping to drive sustainable economic growth.
Support for the self-employed
Acknowledging the important role small businesses play in the UK economy, the Chancellor announced measures to reward self-employed individuals for their hard work.
These changes included eliminating Class 2 National Insurance and reducing Class 4 National Insurance from 9% to 8%.
Business rates support package
A £4.3bn business rates support package over five years was announced. This includes freezing the small business multiplier for the fourth consecutive year and extending Retail, Hospitality and Leisure (RHL) relief to continue supporting vulnerable businesses.
R&D tax relief reforms
The Autumn Statement 2023 ushered in significant reforms to R&D tax relief to foster innovation across the business landscape.
From April 2024, the current R&D expenditure credit (RDEC) for larger businesses and the SME R&D scheme for smaller enterprises will merge into one scheme.
This will reduce the tax rate for loss-making companies from 25% to 19% and lower the threshold for additional support from 40% to 30%, expanding eligibility to about 5,000 more SMEs.
Other Measures
The statement includes a freeze on alcohol duty.
Reforms were announced to streamline the pensions market by encouraging the consolidation of pension schemes, anticipating that most savers will be part of large schemes.
Sector Specific announcements
Numerous sector-specific announcements also centred on manufacturing, green industries, digital technology and AI, life science and the creative industries.
- Acknowledging the crucial role of advanced manufacturing sectors, the Government plans to invest £4.5bn in the automotive, aerospace, life science and green industries.
- Substantial investments in artificial intelligence (AI) and digital technologies will help unlock domestic computing power for AI R&D.
- Life science businesses will receive increased funding for clinical trials, manufacturing investments in life sciences and genotyping.
- New funding and enhanced tax incentives for creative businesses, particularly for the visual effects sector, will be introduced to help grow the industry. This includes focusing on film and high-end TV production.
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This article is intended is based on our understanding of the 2023 Autumn Statement, and does not constitute advice or a recommendation. Professional advice should be taken on your specific circumstances. You should not make any decisions based upon the contents of this article.
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