Our Directors have read through the Autumn Statement and given their thoughts on its contents and how it might affect your business in the coming months and years.
Our Directors have read through the Autumn Statement and given their thoughts on its contents and how it might affect your business in the coming months and years.
Karen gives us her opinion on the Implications of the statement for taxes and personal finances, Ryan discusses business, employment and wages and Ivan looks at the Government’s R&D plans and how the Making Tax Digital programme is going.
Taxation and personal finance
By Karen Scholes
There were some minor, but still interesting, changes to the way that personal taxation and finances are being regulated in the Autumn Statement.
These, of course, are important to understand for all of us as they affect our pensions, savings and how much we take home.
The Government plans to maintain the current rates of Income Tax in England, including the basic (20 per cent), higher (40 per cent), and additional (45 per cent) rates.
However, they confirmed that they will be maintaining the threshold for the additional rate, which previously fell from £150,000 to £125,140.
We are all waiting with bated breath for the Scottish Budget, which is expected on 19 December, to decide whether Income Tax rates will change here, but perhaps this is a sign of things to come.
Currently, the Scottish Income Tax rates remain the same:
- £14,733 to £25,688 = Scottish basic rate (20 per cent)
- £25,689 to £43,662 = Intermediate rate (21 per cent)
- £43,663 to £125,140 = Higher rate (42 per cent)
- Above £125,140 = Top rate (47 per cent)
As expected, the Dividend Tax rates remained the same and the Dividend Allowance was reduced from £1,000 to £500, starting in April 2024.
The Capital Gains Tax annual exempt amount was decreased from £6,000 to £3,000, so you might need to reassess any investments or property sales from April 2024 for possible increased tax liabilities.
The Government is freezing the limits on Individual Savings Accounts (ISAs) at £20,000 for 2024/25 meaning that you can still make full use of your tax-free interest gained from these accounts.
Several changes were made to the tax regime for pensions for 2023/24 in the Spring Budget and these include the following, which will remain at their 2023/24 levels for 2024/25:
- The Annual Allowance (AA) is £60,000.
- Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
- No Lifetime Allowance (LA) charge.
Finally, the VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2024, staying at £85,000 and £83,000 respectively.
Business, employment, and wages
By Ryan Allan
One of the major changes announced in the Autumn Statement involved National Insurance Contributions (NICs).
In his speech, Jeremy Hunt announced that would cut the main rate of Class 1 employees NICs from 12 per cent to 10 per cent (starting in January 2024).
In theory, this should mean a major tax cut for 27 million working people, but, as we will see, businesses are unlikely to benefit from this tax break.
The employer rate of NICs isn’t changing, so you won’t feel a benefit to your business. The NICs for employers is still 13.8 per cent.
The National Living Wage and National Minimum Wage were also both raised by roughly 10 per cent overall, meaning that business owners will have increased costs associated with paying their employees.
Because of higher wages, your employer NICs will naturally increase too.
This is at a time when many businesses are struggling with costs in general and are hampered by low cash flows.
In essence, the Government has done nothing to support small businesses through taxation, so this is an important time to reevaluate your cash flow and general finances.
Having said that, Jeremy Hunt did announce that Full Expensing would be made permanent and that he would be removing some of the barriers to critical infrastructure by speeding up electricity grid connection times.
So, it wasn’t all doom and gloom for businesses but signals a need for preparedness and a proactive approach to taxation.
Making Tax Digital and R&D
By Ivan Houston
Chancellor Jeremy Hunt highlighted significant movements in the areas of Making Tax Digital and Research & Development (R&D), which are set to have a profound impact on the way businesses operate in the UK.
Regarding Making Tax Digital (MTD), the Government has opted to keep the threshold at £30,000.
This decision is somewhat beneficial for smaller businesses, ensuring that they are not burdened with the complexities of digital tax reporting immediately.
In addition to maintaining the threshold, the Government plans to roll out design changes to simplify the MTD system from April 2026.
These steps indicate a balancing act between digitising the tax system and addressing the practical challenges faced by small-scale businesses and making the whole process accessible to all.
Additionally, the Chancellor announced a major reform in R&D tax schemes.
Beginning April 2024, the R&D Expenditure Credit (RDEC) and SME schemes will be merged, simplifying the process for companies to claim R&D tax credits.
The rate under the merged scheme will be set at the current RDEC rate of 20 per cent.
Moreover, for loss-making companies, the notional tax rate in the merged scheme will be reduced from 25 per cent to 19 per cent.
These changes demonstrate the Government’s commitment to fostering an innovative business environment.
Simplifying the tax relief process for R&D activities and offering more significant financial incentives, especially for smaller firms, could spur a wave of innovation across various sectors.
The Government’s strategy seems aimed at nurturing technological advancement and innovation, crucial for maintaining the UK’s competitive edge in the global market.
Overall, these developments in tax and R&D policy reflect a concerted effort to support business growth and innovation.
By easing the tax landscape and incentivizing R&D investments, the Government is not just aiding current businesses but also paving the way for future economic progress through technological advancements.
A final note from all at Scholes
As we reflect on the Autumn Statement, it's clear that while the full impact of these changes is yet to unfold, there are definite implications that warrant our (and your) attention.
The Statement presents a mixed bag – offering benefits for some, like individual taxpayers, who may find solace in the stability of tax rates and adjustments to personal finances.
However, for business owners and employers, the landscape looks somewhat more challenging, with increased costs and complex changes in tax and digital reporting.
The nuanced nature of these changes means that different sectors and individuals will experience varied impacts.
For businesses, while there are opportunities in terms of investment and R&D incentives, there are also areas of concern, particularly around the increased wage costs and the complexities of the new tax regulations.
The next few months are going to be a balancing act that requires careful navigation.
If you find yourself uncertain about how the Autumn Statement might affect you or your business, we encourage you to reach out to our Scotland-wide team.
Scholes is ready to provide tailored advice and support, helping you to understand and adapt to these new measures.
Whether it's reassessing your financial strategy, exploring the implications for your business, or simply seeking clarity on the new policies, we are here to guide you through these evolving economic times.
If you are concerned about any of the issues raised by the Autumn Statement, please contact one of our experts for advice.
