Autumn Statement 2023

There had been a great deal of anticipation leading up to the Chancellor’s Autumn Statement which was announced on 22nd November 2023.

The Chancellor Jeremy Hunt presented a plan which amended some interesting points of tax policy but seemed to avoid any major structural updates. Standout changes were cuts to National Insurance and placing the expensing of corporate investment onto a permanent basis.

The measures announced are in the most part welcome, but they do not change the fiscal landscape in any dramatic way for most people. Some of the rumoured changes such as inheritance tax reform did not appear, however there is still a chance for this to be addressed in the Spring Budget which is due to take place in March 2024.

We take a look at the most significant changes in the Autumn Statement 2023 and explore how they may impact you.

Full expensing of corporate investment

The Chancellor confirmed that ‘full expensing’ of corporate investment in plant and machinery would be made permanent at a cost of £10.7 billion a year by 2027/28.

This may be welcome news for business owners as permanent ‘full expensing’ will encourage capital expenditure by large enterprises, allowing them to offset the cost of such capital expenditure against taxable profits. Whilst this is in principle of benefit to businesses of all sizes, it will principally benefit larger businesses and industries where capital expenditure for retooling or development is a large part of total costs.

This may be of interest to electric vehicle manufacturers in particular as the Chancellor is keen to promote further investment in the electrification of road transport.

Reduction in National Insurance contributions

The Chancellor announced that the main rate of class 1 employee National Insurance contributions (NICs) will be reduced from 12% to 10% with effect from 6 January 2024. The main rate of class 4 self-employed NICs will be cut from 9% to 8% from 6 April 2024 and class 2 will be abolished.

This is a welcome change, though it is one that will only affect earnings up to £50,270. This appears to be designed to cut total taxation for most people, but limit the extent of that cut by making the reduction to National Insurance and not Income Tax. This is therefore a ‘nice to have’, but it will not move the needle in terms of major changes to personal taxation.

For lower-paid earners, the increase in the National Living Wage by 9.8% to £11.44 per hour will make a meaningful difference, and this is a positive step.

Self-employed NIC

For the self-employed, the abolition of Class 2 National Insurance contributions will remove a small annual cost, though Class 2 was always very much smaller in scale than Class 4. Whilst welcome, this is not significant in the scope of impact that it will have on net pay for these individuals.

State Pension

For pensioners and individuals in receipt of state benefits, the confirmation that the State Pension will rise by 8.5% will be a comfort as the country struggles with the overhang of high inflation. Similarly, Universal Credit will rise by 6.7%.

The Autumn Statement was perhaps marked more by the absence of any major announcements on matters that had been hinted at beforehand. There was no change to Income Tax, VAT, or Inheritance Tax, and this may be something that the Chancellor revisits at the Spring Budget before a probable General Election later in 2024. The total tax burden as a share of GDP remains the highest it has been in 70 years, and is forecast by the Office for Budget Responsibility to increase further in the coming 5 year period.*

This could therefore be considered an intermediate budgetary announcement. Any major announcements, if they are to be made at all prior to the next election, are likely to be made in the Spring.

For our full summary of the 2023 Autumn Statement highlighting the key aspects likely to affect you, please click here.

Download the report

*Economic and fiscal outlook, Office for Budget Responsibility November 2023

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James Batchelor

James Batchelor

Chartered Financial Planner

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