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The 2023 Autumn Statement: Key Takeaways for Accountants

23 Nov 2023

The Chancellor, in his Conservative-coloured blue tie, has just delivered the Autumn Statement. He finished with the new trend of ‘rabbit out the hat announcements’, this time with a cut to National Insurance.

This article looks at key autumn budget takeaways for accountants as you look at how best to advise clients.

Read on for more information about the 2023 Autumn Statement and discover how 20:20 Innovation can help. If you would like more information about joining why not book a free 30-minute demo with our team today.

How does the Autumn Statement impact small businesses and self-employed?

One of the highlights of the Statement is the focus on small businesses. The Chancellor has introduced several measures aimed at supporting this vital sector of the economy.

One of those measures is that for 2024/25, the small business multiplier will continue to be frozen and the 75% Retail, Hospitality and Leisure business rates relief will continue to apply.

All unincorporated businesses will be able to take advantage of the cash basis. This becomes the default accounting method from 6th April 2024, although businesses can opt-out and revert to the accruals basis if they wish.

To improve take-up of cash accounting, entry and exit thresholds based on turnover will be removed, as will the restrictions on interest deductions and loss relief. Currently, businesses are only able to join the cash basis if their cash basis turnover is less than £150,000, and they are forced to leave in certain circumstances where their turnover exceeds £300,000).

Under MTD for income tax, businesses will keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. These requirements will be phased in from April 2026, starting with sole traders and property landlords with gross income over £50,000.

Chancellor of the Exchequer announces Autumn Budget Statement

In readiness, some ‘design changes’ to the scheme have now been announced to simplify and improve the system. These include:

  • Simplifying the requirements for providing quarterly updates by making them cumulative and adding functionality to amend or correct errors throughout the year;
  • Simplifying the rules for taxpayers with more complex affairs, such as landlords with jointly-owned property;
  • Removing the requirement to provide an End of Period Statement, with emphasis instead placed on a final declaration;
  • Exempting some taxpayers altogether, including foster carers and those without a National Insurance number; and
  • Enabling taxpayers using MTD to be represented by more than one tax agent.

There was also a notable simplification of taxes for the self-employed in the way of the removal of the requirement to make Class 2 National Insurance Contributions (NIC) and a reduction in Class 4 NIC by 1% point to 8%, effective from April 2024. This move is expected to ease the tax burden on self-employed individuals, providing them with more financial flexibility, which is welcome since the group felt excluded from schemes available during the pandemic.

What were the autumn budget changes for employees?

Employees are also set to benefit from the new measures. This appeared to be the ‘cherry on the cake’ towards the end of the announcement with the main Class 1 NIC rates being cut from 12% to 10%.

This is also coming into effect earlier than we would have anticipated, starting from 6 January 2024. The mid-year change is something that accountants will need to closely monitor and prepare for, ensuring that payroll systems and employee communications are updated accordingly.

Payroll software providers will also have to make sure their systems are updated within a very short turnaround time.

Accountant looks at how to advise clients on autumn statement

Did the autumn statement have a corporate focus?

For businesses, particularly those investing heavily in plant and machinery, the Chancellor's decision to make 'full expensing' a permanent fixture is significant. This means qualifying expenditure can be relieved at 100% of the qualifying cost each year, without limit. While this is a generous measure, it's important to note that it primarily benefits companies (and groups of companies) with annual capital expenditures exceeding their £1 million annual investment allowance.

The Research and Development (R&D) scheme is also undergoing further changes, for accounting periods beginning on or after 1 April 2024. The merger of the schemes will be accompanied by a second new scheme for certain R&D intensive companies. These changes indicate that 2024 will be a challenging year for R&D claims, meaning careful planning and strategy from accountants will be very much needed. Certainly, any accountant operating in this area needs to ensure their team are kept up to date so watch out for the next 20:20 Innovation webinar on this topic.

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The Role of AI in Future Growth and MTD

The Chancellor's commitment to funding AI innovation, including a £500 million investment in developing supercomputers and AI technologies, shows the growing importance of this field. This move signals the government's recognition of AI as a key driver of future economic growth.

Although the £30,000 threshold still applies, the requirement to provide an End Of Period Statement (EOPS) has been removed and taxpayers will now be able to be represented by more than one tax agent. Other more specific measures have been put in place such as simplifying the way joint landlords deal with their quarterly reporting and allowing more taxpayers to be exempt, for example, those without a national insurance number.

What Was Missing?

Interestingly, the statement did not address changes in income tax rates and bands. Additionally, there was no mention of Inheritance Tax (IHT) despite being expected, or Stamp Duty Land Tax (SDLT), suggesting that these areas might be revisited in the Spring Budget 2024.

Two tax advisors look at autumn statement takeaways

The Autumn Statement in Summary

As accountants, it's crucial to stay abreast of these developments and understand their implications for our clients as well as the broader economic landscape.

Join our 20:20 Innovation webinar titled ‘Autumn Statement 2023 – Hot off the press’ to be kept up to date with what you need to know and what you should be talking to clients about.

If you would like more information about joining 20:20 Innovation, why not book a free 30-minute demo with our team today or call us on +44 (0) 121 314 2020.