Released 22 November 2023
The Chancellor of the Exchequer has delivered his Autumn Statement 2023 to Parliament.
Whilst the Team at TBLA continues to digest the total 120 pages, we’ve highlighted some of the most significant items that affect individuals and small businesses:
Significant changes in National Insurance Contributions
From April 2024, Class 4 National Insurance Contributions (NICs) for the self-employed will be reduced from 9% to 8%. Additionally, no self-employed person will have to pay Class 2 NICs, saving those who are self-employed £179.40 per year.
Voluntary Class 2 contributions will still be possible for those whose profits are under £6,725.
It’s good news for those in employment, too. According to the treasury, employees will be happy with their payslips from January 2024 onwards as their NICs will reduce from 12% to 10%, saving the average employee £450 a year.
Cash Accounting Basis
The Chancellor announced that the cash basis will replace accruals for the self-employed as the standard accounting process for the 2024/25 tax year. Income and expenses are recognized when money changes hands rather than when an order is made, fulfilled, or billed. The simplified cash basis for calculating taxable profits will become the default method. The alternative accruals approach will still be available by election.
Your TBLA account manager will evaluate whether this impacts you and your business as part of completing your 2024 25 self-assessment tax return.
Changes to Making Tax Digital for Income Tax (MTD-ITSA)
MTD-ITSA plans have now changed so that an end-of-year statement will not be required when MTD-ITSA is eventually introduced.
This means that accounting information based on the cash basis will need to be put directly into the tax return and will not need to be supported by a profit and loss account.
The date for this change has yet to be announced. However, we expect this to be linked to the MTD-ITSA rollout and the reporting of business cash flows every quarter.
What does this mean for you?
If you are not on cloud accounting, now is the time to get software such as FreeAgent for your business accounting and tax returns. Cloud accounting will make quarterly reporting much easier when the time comes.
Please get in touch with us if you’re interested in moving to cloud accounting for the start of the 2024-25 tax year.
Full expensing is a tax relief scheme that allows UK companies to deduct 100% of the cost of qualifying plant and machinery in the year it is bought instead of spreading the cost across multiple tax years. This scheme was introduced in the UK Government’s Spring Budget 2023 for three years but has now been extended indefinitely.
Full expensing has little impact on businesses investing less than £1 million in a tax year on plant and machinery as such businesses have been, and will continue, to benefit from the Annual Investment Scheme. If applicable, you will have seen a reference to the Annual Investment Allowance on your corporation or personal tax return.
If you’re planning large expenditures, feel free to contact your account manager to ensure the spending is done in the most tax-efficient way.
Business rates relief for the hospitality sector
Businesses in the retail, hospitality, and leisure industries will continue to receive a 75% discount worth up to £110,000 on their business rates bill for the following year. This extension of business rates relief is crucial for the sector, which the pandemic has significantly impacted. However, businesses whose property has a rateable value of £51,000 or more will see their business rates bills increase by 6.7% next April.
- from 1 April 2024, the national living wage will increase by 9.8% to £11.44 an hour, with the age threshold lowered from 23 to 21 years old. *See footnote on the “real living wage”
- from 1 April 2024, the national minimum wage will be increased to £8.60 an hour for 16–17-year-olds and to £6.40 an hour for apprentices.
- state pension is set to increase by 8.5% in April 2024 (Pete and Ricky are delighted!).
- the existing R&D expenditure credit and small and medium enterprise (SME) scheme will be merged from 1 April 2024.
- the rate at which loss-making companies are taxed within the merged R&D scheme will be reduced from 25% to 19%, and the threshold for additional support for R&D-intensive loss-making SMEs will be lowered from 40% to 30%.
- the climate change agreement scheme providing for reduced rates of climate change levy will be extended, giving energy-intensive businesses around £300 million of tax relief every year until 2033.
- the investment zones programme and freeport tax reliefs will be extended from 5 years to 10 years.
- three advanced manufacturing investment zones will be established in Greater Manchester, East Midlands, and West Midlands.
- duty on all tobacco to increase by RPI plus 2%, with the rate on hand-rolling tobacco to increase by RPI plus 12%, from 22 November 2023.
- alcohol duty will be frozen until 1 August 2024.
If you have any questions about the budget or other accounting and tax matters, please get in touch with your account manager at Triple Bottom Line Accounting.
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*As a member of the Living Wage Foundation, TBLA advocates for a “real living wage” of £12 an hour for all 18-year-olds and older (£13.15 in London. This is not a legal requirement nor referenced in the Autumn Statement.
Luke joined TBLA in 2014, after graduating from the Norwich Business School. He became a member of the Institute of Chartered Accountants in England and Wales in 2019. Specialising in new business start-ups, taxation and small enterprise, he has been able to help many clients make their dreams of running their business a reality. He helps established companies with strategic financial and tax advice to achieve their goals.