Private client partner James Cook gives his verdict on today’s Autumn Statement 2023.
Navigating economic challenges
With taxes at a record high since the Second World War and the recent announcement that Rishi Sunak’s Government achieved its pledge of halving inflation by the end of the year, pressure was mounting on the Chancellor to cut taxes. However, did the Autumn Statement live up to Tory backbenchers’ expectations?
The Chancellor announced 110 growth measures to back British business by boosting investment and increasing productivity. He focused on the UK’s ability to lower borrowing, debt and inflation, without dwelling on the sharply downgraded growth forecast from the Office of Budget Responsibility (0.7% lower than expected for next year). Whilst the Chancellor promoted a growing and innovative economy, the reality does not look quite as rosy.
Unprecedented tax cuts and sectoral impacts
There were some stark headlines including the biggest business tax cuts in British history with:
- the decision to make permanent the full capital expensing for businesses meaning that investment in plant and machinery can be deducted from taxable profits
- the abolition of Class 2 National Insurance
- the reduction of Class 4 National Insurance by 1% and
- the significant reduction in Employee National Insurance from 12% to 10% from 6 January 2024.
Pensions yet again got a mention with the intention to allow employees to request a new employer to pay pension contributions into their existing pension pots and the 8.5% increase in the state pension.
The retail and hospitality sector did well, with a freeze on alcohol duties and the extension to the 75% discount on business rates, albeit that they must also contend with a rise in the national living wage.
In contrast, local planning authorities will not be pleased to hear the Chancellor’s requirement for the prompt processing of applications or your money back!
The hidden reforms: ‘the devil in the detail’
Hidden in the detail, the abolition of the Pension Lifetime Allowance was reconfirmed (having been trailed in Spring Budget 2023) and the Married Couples Allowance is to be increased by 6.7% CPI, alongside tweaks to the ISA regime (including an expansion to Innovative Finance ISAs). A welcome announcement is the intention to “improve the data HMRC collects from its customers”.
All in, the Autumn Statement was fairly quiet and the reduction in National Insurance will in reality do little to negate the freeze in the thresholds since 2021, at which rates of Income Tax and National Insurance contributions apply. With much rumour before the Chancellor approached the dispatch box about tax cuts, the biggest headline of all may well be ‘what was not announced!’ The Chancellor did not engage in the notion of cuts or sweeping changes to Inheritance Tax, and in contrast, the shadow chancellor reiterated her intention to abolish the non-domicile regime.
With a general election now seemingly looming, how well the Chancellor’s announcements today are received, primarily from businesses, will no doubt be a significant factor in how likely it is that it will be Ms Reeves herself delivering the next Autumn Statement…
James Cook is in the private client team, advising on estate and succession planning, wills, probate, trusts, tax-planning, lasting powers of attorney, enduring powers of attorney and Court of Protection matters.