Jeremy Hunt has delivered an Autumn Statement he said will grow the economy and back British businesses, but while many of the fiscal plans announced seem generous, businesses may still see increased financial pressure in 2024.
Now that the Prime Minister’s three economic priorities have been met – inflation has more than halved from 11% last autumn to 4.6% in October, the post-pandemic economy is recovering quicker than expected and debt is forecast to fall as a proportion of GDP over the medium term – the Chancellor has set out 110 measures he claimed would further reduce debt, cut taxes, reward work, deliver world-class education, build domestic, sustainable energy and back British businesses.
For businesses, the main headline is that full expensing for qualifying capital spend has been made permanent which is a welcome change giving certainty to businesses in planning for their capital investment.
For individuals, the cuts in National Insurance for employees and the self-employed will be welcomed, however, this will not compensate for the fiscal drag caused by frozen income tax thresholds which will still see the tax burden rise to record levels.
Becky Bowness, Armstrong Watson’s Head of Tax, said: “We hoped for more support for small and medium businesses but instead, we were surprised by the quantum of spending announced. The tax changes that were announced are unlikely to help our family-owned businesses.
“For example, as anticipated, full expensing for capital expenditure has been made permanent, however, there is already relief available for expenditure up to £1 million, through the Annual Investment Allowance which is less restrictive, and given that few family-owned businesses will spend more than this the impact of this change is unlikely to provide much benefit.
“The merging of the R&D schemes will inevitably have a detrimental impact on SMEs albeit it should eradicate some abuse of the scheme.
“National Insurance changes for employees will put more money in the pocket of the workforce but given the unprecedented increase in the National Living Wage, and no corresponding reduction in employers’ National Insurance, employers will face increasing costs in 2024.
“It cannot be ignored that given the freezing of income tax thresholds, the tax burden will continue to rise to a record level over the five-year period to 2028.
“Abolishing Class 2 National Insurance and the reduction in Class 4 was suggested to support entrepreneurial individuals, however, given the minimal saving this creates in real terms, it is unlikely to have a significant impact.
“Notably, two key taxes that were widely speculated to be amended pre-Autumn Statement have not been mentioned - Stamp Duty and Inheritance Tax. The question is could this be phase 1 and these be announced in the Spring Budget?”