2023 Autumn Statement

2023 Autumn Statement

The Chancellor delivered his Autumn Statement this week.  There has been a lot of speculation on tax in the last week or so…….  Here are the key points:

• The tax, VAT and National Insurance thresholds were not specifically mentioned so for the time being we must assume they are unchanged

• National Insurance has been reduced

• Capital expensing has been extended but in practice this does not make a difference to smaller SMEs

• The extension of some business rate reliefs was announced

​​Corporation Tax and Capital Allowances 

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Corporation tax remains at 25% and smaller companies will continue at 19% although there are some very complicated rules around owning multiple companies and accessing the lower 19% rate.

The annual investment allowance will remain at £1m so the headline grabber of full expensing doesn’t really apply to the SME community as we have been able to fully expense for some time albeit under a different banner.

Electric Cars

No changes to the current electric car regime were made and particularly with increases in Corporation tax this can be a useful tool to help manage down the 25% Corporation Tax rate if it applies to a business. 

​The P11D benefit is also lower than for traditionally fuelled vehicles and hybrids and therefore remains worthy of consideration.

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VAT Threshold

The VAT threshold will remain at £85,000 – remember this is a rolling 12 month period not a calendar or business year and given recent price increases its becoming increasingly easy to exceed this.

Personal Tax

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By their omission, we can conclude:

• The personal allowance is frozen at £12,570 until 2028;
• The additional (45%) tax rate will now be payable on incomes of more than £125,140;
• A reduction in the dividend allowance from £1,000 to £500 from April 2024 – this will affect the vast majority of company owners
• The Capital Gains Tax Annual exemption will reduce to £3,000 as planned from April

National Insurance and Dividend Tax

Some changes to National insurance were also announced:

• Employee National Insurance reduced to 10% from 6th January 2024
• Class 4 National Insurance reduced by 1% from 6th April 2024
• Class 2 national Insurance abolished from 6th April 2024

Although originally historically linked to National Insurance, dividend tax will not be reduced and remain at 8.75% for basic rate tax paying Company Directors.

​This basically means that given higher rates of Corporation Tax in some circumstances the old model of small salary v dividends may for the first time be less efficient than PAYE.  This will vary on a business by business basis and the ability to access the Employment Allowance.

Minimum Wage

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Earlier this week, increases to the rates of minimum wage were announced from 1 April 2024. 

​Care is needed to ensure you are paying this rate and that any pension duties are covered off with part time employees likely to come into the pension scheme threshold. 

​There has been some high profile ‘naming and shaming’ in this area.

NMW Rate                                                                                 £ Increase               % Increase
National Living Wage (21 and over)   £11.44         £ 1.02                        9.8%
18-20 Year Old Rate                                    £8.60            £1.11                        14.8%
16-17 Year Old Rate                                    £ 6.40           £1.12                        21.2%
Apprentice Rate                                             £ 6.40           £1.12                        21.2%