Mind your headroom

In the weeks leading up to the Autumn Statement, the press was full of speculation about tax cuts. This was a surprise, just over a year after the tax cuts announced by Kwasi Kwarteng were judged imprudent by the international markets, contributing to a fall in the value of sterling and increases in interest rates. Nevertheless, it seemed that a side effect of inflation was that higher incomes and prices had fed through into higher tax receipts; the Chancellor had more in his coffers – more ‘fiscal headroom’ – than had been predicted in the Spring, and commentators were suggesting what he might do with it.

Mr Hunt started his speech by claiming he was bringing forward 110 growth measures to back British business. He did not list them all in the speech, but there is no doubt that the documents released on the internet when he sat down contained a mass of detail – some specific rule changes coming in on particular dates, and some outlines of plans that are being considered for later.

The documents include a table showing the financial effects of the proposals, which highlights what is really significant and what is more marginal. Reductions in National Insurance amount to £9.3 billion in 2023/24 and similar amounts each year after that; changes to tax relief for capital expenditure come to similar amounts in the longer term. On the other hand, HMRC hope to collect
£1 billion a year extra from the sinister- sounding ‘investment in debt management capability’.

This document summarises the main tax changes that were announced by Mr Hunt, with an explanation of what they are likely to mean for your business or your family. If you would like to discuss what these measures mean for your individual circumstances, we will be pleased to help. 

Significant points

  • Cuts to employee NICs take effect from 6 January 2024 and self-employed NICs from 6 April 2024 
  • 100% first year allowances (‘full expensing’) for companies made ‘permanent’ (originally due to expire 31 March 2026)
  • Extension of the ‘cash basis’ of computing taxable profits for unincorporated businesses 
  • Reforms to tax reliefs for research and development and creative industries
  • Affirmation of support for the state pension ‘triple lock’ with an 8.5% increase from April 2024, based on average earnings
  • No changes announced to Income Tax, Inheritance Tax or Stamp Duty Land Tax – all remain fixed at levels previously announced
  • Simplifications announced to the Making Tax Digital regime to be introduced for income tax self- assessment in April 2026