2023 Autumn Statement: What the Budget means for you

Rayhaan Moughal

The recent 2023 Autumn Statement from the UK government was positioned as a fiscal strategy geared towards reducing taxes and bolstering business growth. While these objectives sound promising on paper, we at Sidekick are left wondering how the specific measures announced truly benefit our clients and UK business owners in general. Here’s what was announced and what it means for you.

Key Announcements

  • A reduction in National Insurance rates from 12% to 10% starting January 2024.
  • Revisions to self-employment taxes, including the elimination of Class 2 NIC and a decrease in Class 4 NIC from 9% to 8%, effective April 2024.
  • An increase in the National Living Wage to £11.44 per hour, effective from April 2024.
  • Permanent Extension of Full Capital Expensing
  • Updates to the R&D tax credit scheme.
  • No changes to tax thresholds.

The Details

National Insurance Rate Reduction

From January 2024, the rate for Class 1 National Insurance Contributions will be cut from 12% to 10% for earnings between £12,570 and £50,270. Earnings above £50,270 will continue to attract a 2% rate. This change is anticipated to save an average employee, with annual earnings of £35,400, about £450 per year. However, for limited company directors compensated through dividends and minimal salaries below £12,570 won’t see an impact, although it will mean a modest increase in the take-home pay of their employees in the new year.

Self-Employment Tax Reforms

With the striking of Class 2 NIC and the reduction of Class 4 NIC from 9% to 8%, self-employed people stand to benefit financially with an average saving of £192 per year. These changes, effective from 6 April 2024, do not apply to those operating through a Limited company.

National Living Wage Increase

Starting April 2024, the National Living Wage will see a relatively large increase of 9.8%, reaching £11.44 per hour for workers over 23. If you employ staff at minimum wage this change could significantly impact your business’s profitability.

Permanent Extension of Full Capital Expensing

Originally introduced in the Spring Budget of 2023 and scheduled to conclude in 2026, this measure has now been made a lasting fixture in the UK’s tax landscape. Full capital expensing is a boon for businesses investing within the UK, offering a substantial reduction in corporation tax liabilities. Specifically, for every £1 spent on IT, machinery, and equipment, businesses can reclaim 25p against their corporation tax.

R&D Tax Relief Scheme Changes

The government plans to consolidate the RDEC and SME R&D schemes into a single scheme from April 2024. The threshold for being classified as ‘R&D intensive’ has been lowered from 40% to 30% of total qualifying R&D expenditure, enabling more businesses to qualify for higher tax relief.

Static Tax Thresholds

No changes were announced regarding tax thresholds. Given the high inflation rates, more individuals are entering higher tax brackets, inadvertently increasing the government’s overall tax revenue despite the headline tax cuts.

Accountants View

Amidst a stagnant UK economy, we were anticipating more hard hitting support for growing businesses and their staff. Despite claims of growth, the reality for many business owners seems contrary.

Further Information:

The complete Autumn Statement is accessible on the government’s website here.

Guidance and Support

This summary is informational and not intended as specific advice. For personalised guidance on these updates, reach out to us at Sidekick Accounting. For any queries or discussions regarding these changes or other business matters, email us at hello@sidekickaccounting.co.uk.