The Chancellor of the Exchequer, Jeremy Hunt, delivered his first Autumn Statement on Wednesday 22nd November 2023. We’ve put together a summary the key announcements from the statement that are likely to impact our clients.
The Office for Budget Responsibility (OBR) has forecast that, due to inflation, the UK's economy will grow more slowly than previously thought over the next 2 years due to inflation. This means that the high prices consumers and businesses are currently facing will take longer to come down.
Since April 2023 businesses with more than £250,000 in profits have been paying a higher rate of corporation tax at 25% while companies with profits between £50,000 and £250,000 pay tax at the main rate of 19% reduced by a marginal relief. Alongside the increased rates of corporation tax were introduced the government also introduced a ‘full expensing tax relief’ policy that provided a 100% deductible first year allowance on qualifying investments.
When a company incurs capital expenditure on assets that would otherwise qualify for the main pool e.g., plant and machinery, furnishings, manufacturing equipment, IT hardware and software, it can claim a first-year allowance and take a 100% in year deduction. In addition, for assets that would otherwise qualify for the special pool (such as electrical systems, lighting systems and long-life assets) a 50% first year allowance is available (with the balance being introduced into the special rate pool as normal).
Initially it was announced that full expensing would run until March 2026, but in the Autumn Statement Jeremy Hunt confirmed that ‘full expensing tax relief’ is now permanent.
This will enable most businesses to access a cash tax saving of 25% of their qualifying expenditure on plant and machinery.
“The chancellor in his Autumn Statement said to the House of Commons that the full expensing policy was the 'largest business tax cut in modern British history'.
This tax incentive designed to encourage businesses to invest in plant and machinery will now become a permanent fixture. This policy allows businesses to claim up to 25p in every £1 of investment for relevant asset purchases. This equates to £3bn annual increase in business investment according to The Office for Budget Responsibility (OBR). According to the treasury it will equate to annual tax cuts of £10bn. This should encourage more investment which is the key for growth.”
Vineesh Madaan, Managing Director of Bluestone
The small business rates multiplier at 49.9p will remain frozen for the 2024/25 rate year for small businesses with rateable values of lower than £51,000.
The Chancellor also announced an extension of the retail hospitality and leisure relief (RHL relief) for another year at 75%, capped to £110,000 per business.
Businesses on the standard rate multiplier (which is currently 51.2p) will face an increase in line with CPI inflation rate which will be a significant increase for many businesses.
From April 2024 minimum wage will increase from £10.42 to £11.44 per hour for workers aged over 23 and, for the first time, minimum wage will apply to 21- and 22-year-olds. The National Minimum Wage for 18-20-year-olds will also increase from £7.49 to £8.60 an hour and the minimum wage for apprentices will increase from £5.28 to £6.40 an hour.
Mr Hunt told the Conservative Party conference in October that the minimum wage was set to rise above £11 in April, but the confirmed rises represent a 9.8% increase for over-23s on last year, and a 12.4% jump for workers aged 22 and 21.
In an attempt to simplify the R&D tax reliefs, the Government will combine two regimes by bringing the SME scheme into the R&D Expenditure Credit (RDEC) regime. Companies will receive a before-tax credit at 20% of qualifying expenditure. The notional tax charge on the credit for loss-making claimants will be reduced from 25% to 19% which will increase the cash credit received and, in part, mitigate the reduced generosity for SMEs.
The newly merged scheme will apply to accounting periods beginning on or after 1 April 2024, so R&D relief claimants should review the detail of the changes soon to plan ensure they are prepared.
The plastic packaging tax will increase from £210.82 to £217.85 per tonne from 1 April 2024.
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