I watched Jeremy Hunt’s Autumn Statement today – there was a bit of good news for everyone I thought.
There was certainly a more optimistic feel with this speech compared to last year’s Autumn Statement. He mentioned the headline inflation falling from 11.1% to 4.6% since last Autumn which is a good statistic, although it is the Bank of England that has been increasing interest rates to help bring this back to a more realistic level. That said, it makes you feel better the country is going in the right direction compared to where we were 12 months ago.
The main good news is that self employed workers are having class 2 National Insurance abolished and class 4 sees a 1% reduction to 8% for the main rate from 6 April 2024.
In addition, all employees see a 2% reduction in their main rate of National Insurance to 10% from January 2024. Take someone earning £40,000 per annum, they will start to save c£45 per month from January. This will help every employee in the country earning over £12,570. Combine this with 8.5% increase in state pension from April 2024, and I would think you have a positive impact for most voters as we head towards a general election in the next year.
Business Tax
The Chancellor confirmed the measure introduced in the Spring Budget for “full expensing” in respect of IT and plant & machinery investment will become permanent. For large businesses this is positive to encourage investment however for many owner managed businesses, this announcement will make no difference as the Annual Investment Allowance was already enough to provide the equivalent of full capital expensing.
Making Tax Digital
There was no mention of Making Tax Digital for income tax self-assessment (MTD ITSA) during the speech. However, the statement does confirm that it will not be extended to individuals earning under £30,000 for now and will be kept under review. This means the self-employed and landlords with turnover exceeding £50,000 will commence MTD ITSA in April 2026 and £30,000 to £50,000 in April 2027. I do think it is sensible to have a staged approach as this really has not been tested to the level it needs to be at the present time and in my opinion, is much more complex than MTD for VAT which is already in place.
Final thoughts
Mr Hunt mentioned the National Living Wage increase which had already been confirmed before the Autumn Statement. In April 2024 it is set to increase by 9.8% to £11.44 per hour. The Chancellor referred to this incentivising people into work and meant more low-income families will see a larger proportion of their income come from wages rather than benefits. I support the Chancellors reference to mandatory work/training after 18 months for job seekers not being able to find work in order that they can be upskilled.
My main area of concern is who will pay the significant increase in the minimum wage? What about the more experienced staff who earn marginally more than those on minimum wage – should they not get a pay rise as well? If they don’t, then why take on the extra responsibility? Ultimately, this will fall firmly at the door of the business owner, but how do they afford it when things are already tight? Do they take the unfavourable option of redundancies, or do they put up prices? If the latter then it ends up with the public paying higher costs for goods and services which surely drives inflation – but wait, we all have a bit more money in our pockets from the national insurance reduction so that’s ok – or is it?
If you have any questions regarding the 2023 Autumn Statement then please call your usual Lambert Chapman contact on 01376 326266.
Sean Wiegand – Partner