Autumn Statement – Chancellor announces tax cuts for firms and workers
The chancellor Jeremy Hunt has announced tax cuts for firms and workers in his Autumn Statement, delivered to Parliament today (Wednesday).
In what could be the last major economic announcement before a general election, the chancellor shaved an estimated £20 billion off of taxes.
The cuts were made possible because of a stronger outlook from the public finances, as private- and public sector pay rises had led to an income tax bonanza.
He outlined 110 measures he said would grow the economy.
Outlining what he described as the “biggest business tax cut in modern British history” the chancellor made full expensing capital allowance permanent – an effective business tax cut of £11 billion a year and an incentive for firms to invest .
Meanwhile, a business rates support package included a rollover of 75 per cent retail, hospitality and leisure relief for 230,000 properties and a freeze to the small business multiplier, which will protect about 90 per cent of ratepayers for a fourth consecutive year.
He also announced new measures to protect SMEs against late payers – especially larger firms bidding for government contracts.
For earners, the main rate of Employee National Insurance will be cut by two percentage points to 10 per cent from January.
Class 4 NICs for the self-employed will be reduced from nine per cent to eight per cent, and he said that no self-employed person will have to pay Class 2 NICs – saving two million self employed people an average of £350 each a year.
Responding, the British Chambers of Commerce said the statement “gives hope to business”.
Director general Shevaun Haviland said: “Today’s statement provided some welcome remedies at a time when businesses of all sizes need certainty and security from the Government in the difficult months ahead.
“Business investment is the lifeblood of local economies, creating jobs and supporting public services. The Chancellor has today taken a step in the right direction, but nothing can be taken for granted and we must all continue to focus on encouraging companies to grow.”
The Federation of Small Businesses called the statement “game-changing”.
Policy chair Tina McKenzie said: “Jeremy Hunt has today taken very welcome action on late payments, small businesses’ rates, and self-employed taxation.
“Small businesses – and the 16 million people who work for them – are the route to future growth that will raise living standards across the whole country.
“The chancellor and his Treasury team deserve credit for driving pro-small business change and for listening to and working closely with FSB and its small business members to address the real concerns of businesses and acting to help build future prosperity.
“When it comes to late payment, business rates and self-employed tax, it is unquestionably clear that the voice of small business has been heard today.
“This game-changing small business package shows the prioritisation of pro-growth measures where they will do most good, while getting the best bang for the taxpayer buck.”
Locally, Michael Blaken, accounts director at accountancy and law firm Optimum Professional Services, said: “The Chancellor talked about growth measures to back British business and rewarding work, but there wasn’t a huge amount of substance behind it.
“Reducing employee National Insurance and raising the National Living Wage are good news for low-income earners, but this will impact employers of those low earners, such as shops and pubs, who have to fund the wage increase.
“It is good news that the small business rates relief scheme remains in place, and businesses will welcome full expensing for investment being made permanent. However, there is not a great deal in the Autumn Statement for a business of our size.”
Michael said he would like to have seen Income Tax bands increased, to give people more of their income in their wages. But he took heart from duty on alcohol once again being frozen – good news for pubs and drinkers alike.
The West of England has been ‘overlooked’ in the Autumn Statement, according to regional business support service Business West.
The organisation said it was saddened that the region – again – had not been chosen as one of the government’s investment zones.
Matt Griffith, director of policy at Business West said: “This was a ‘two cheers’ type of budget – with some unexpected and welcome surprises set against a challenging economic context.”
“Businesses will welcome the National Insurance reduction, which is a more significant tax cut than we were expecting.
“This will feed directly into workers’ pay packets, which may provide some support for employees facing costs of living pressures and boost consumer spending and take-home pay.”
“The announcement that full expensing will be made permanent will hopefully boost levels of private sector investment.
“Low levels of business investment have been a challenge for the UK for decades and helps explain some of our poor recent performance on productivity and growth across our region, and nationally. This is something that we, and the British Chamber of Commerce, have been pushing for and are very glad to see announced.”
“The year extension for the business rates relief for hospitality and retail, will also be warmly welcomed by these businesses, as they have been under significant pressure since Covid and add so much value to our region.”
“However, we are naturally disappointed that our region was not more visible in the budget. We have not been chosen as one of the government’s investment zones – the second time we have lost out on this flagship government economic policy.”
“Our region is struggling to be recognised at a national level despite the excellent credentials we have in life sciences, clean energy, aerospace and automotive. The risk is that low visibility and level of political ambition starts to undermine our key economic assets and investor sentiment.”
“There is a pressing need for our region to start raising its profile and making the case for investment support to help transform the South West.”
Responding to the government’s commitment to building on the £2.5 billion ten-year National Quantum Strategy,
Rashik Parmar MBE, chief executive of Swindon-based BCS, The Chartered Institute for IT, said: “Creating the UK’s own quantum computing infrastructure is key to our future on the world stage.
“To get those productivity gains, quantum computing needs to be embedded across businesses and driven forward by many more highly skilled computing graduates and apprentices.
“We need to teach quantum principles in schools and we need a new undergraduate degree for people who want to specialise in quantum computing.
“We also need quantum apprenticeships and retraining routes that focus on its application and implementation without the need for post-graduate degrees in mathematics and physics.
“Just like with AI, it’s critical the UK doesn’t get left behind in this revolution in computing power. Otherwise our national security, research reputation and global competitiveness will all suffer.
“Policymakers should see quantum computing as an essential part of the computing profession and expect its specialists to follow clear standards of ethics, inclusivity and accountability – that way we can bring the public with us on the journey.”
Forcing the long-term unemployed to take mandatory jobs is not the answer to the UK’s productivity problem, said Dan Barfoot, operations manager at Wiltshire- and Bath-based CMD Recruitment.
Jeremy Hunt used his Autumn Statement address to boost social welfare support while rolling out tougher benefits sanctions to get 200,000 people into the workforce.
According to figures from the Office for National Statistics, the proportion of claimants assessed as too unwell to work had risen from 21 per cent in 2011 to 65 per cent in 2022.
The chancellor wants people with “limited capability for work-related activity” to take advantage of the post-Covid Working from Home culture.
Dan said: “I still don’t think the government is addressing the main issue in the lack of skillset and companies paying apprenticeship levy funds, which is seen as just another tax and not used properly.
“Not long ago we had the lowest unemployment that we had for 20 years, and forcing the long term unemployed to take mandatory jobs isn’t the answer
“There is no suggestion as to how these people will be monitored and in reality will see a lot more of them claim long term sickness instead.”
For businesses that want to invest in people rather than equipment, the Autumn Statement will be “nothing to shout about,” said Kelly Pinder, director of corporate tax at Bristol-based accountancy company Albert Goodman.
“Although ‘people’ were rewarded in the chancellor’s announcements, I can’t help feeling disappointed with the offerings for companies and employers,” said Kelly.
“Yes, it is good news with the permanence of the full expensing of capital spend on plant, but for many businesses in the South West, this will have limited benefit.
“Companies can already spend £1 million a year on capex and benefit from full relief, without the need to apply the more stringent full expensing rules which includes a claw-back in full on any future monies received for the sale of such assets.
“Investment is great if businesses have the funds to do so, but for those that don’t and/or those that decided to invest in people, this will be little to shout about.
“Local hospitality and leisure businesses will continue to receive the 75 per cent discount on business rates for another year, which should help local businesses facing rising costs.
“We all knew it was coming but we now have more detail on the merging of the two R&D schemes.
“As we have known from recent past changes, smaller businesses are worse off under the new rules from April this year and the larger ones benefitting more.
“I suspect with the merging there will be further levelling up in favour of the bigger corporates, although there was some nod to loss making smaller companies benefitting from a reduced tax rate on claims.
“Again, we will need to see the details to see how this is implemented in practice from April 2024.”
Martin Gurney, tax partner at Haines Watts Swindon, said he suspected Jeremy Hunt was saving any big giveaways for a Spring Budget ahead of a 2024 election.
“From a common sense perspective, given that the backdrop to the Autumn Statement was high inflation, wage inflation, economic challenges and a looming General Election, in my view any significant tax cuts were more of an aspiration rather than an expectation,” he said.
“All of the changes announced really just serve to maintain the status quo. Business rate relief was retained, and the 100 per cent capital allowance claim for qualifying plant and machinery has been retained.
“I like this last relief – it stimulates activity (purchasing new equipment) and accelerates the allowances on this. But let’s be clear – it is an acceleration of relief, not an additional relief.
“The self employed were also given a small helping hand (very small) with the abolition of Class 2 National Insurance – a saving of £3.45 a week.
“Employees were, perhaps, the greatest beneficiaries with a two per cent cut in the main Class 1 National Insurance rate, which will go some way to easing inflationary and interest rate pressures.
“But, overall, I think it is fair to say that Mr Hunt has perhaps kept his political powder dry. We have a Spring Budget which might, if one is sceptical, be a better bet for the announcement of more generous tax policies.”
Dave Southby, a financial adviser based in North Wiltshire who is a partner with St James’ Place, said the chancellor’s announcement that firms should pay into employees’ existing pensions rather than set up new ones would be an administrative struggle.
“The overall economic outlook from the Office of Budget Responsibility (OBR) seems to be more conversative compared to the Spring statement. This to no doubt to reflect the Bank of England’s economic forecast of higher interest rates for longer,” he said.
“I welcome the change to NI with the abolishment of Class 2 and the reduction in Class 1 and Class 4. This will simplify the tax system and give millions of people a tax cut.
“The chancellor made comments around having ‘one pension pot for life’ and although this sounds like a good idea in theory, I fear in reality this is going to be hard to facilitate. This is going to make it very complicated for employers to administer on a monthly basis as they may have several different providers to pay. This also emphasises the importance of advice so employees understand the pros and cons of doing this.
“The triple-lock remains! This is a welcome announcement to many pensioners receiving their money but also to the millions who are set to receive State Pension in the near future.
“Universal Credit and minimum wage are to increase which will help relieve the financial pressures of inflation felt over the past 18 months.”
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