Earlier in the year The Herald hosted the Budget Briefing Breakfast in association with Wright, Johnston & Mackenzie LLP, The Business Insurance Bureau, The Wise Group and Martin Aitken & Co Ltd.
On the release of the Autumn Statement our sponsors reflect on the updates; we follow with comments from Associate Director for Martin Aitken & Co Ltd, Derek Hanlan.
As a tax professional dealing with many small businesses, their owners and families, I am constantly hoping for certainty and clarity when the Chancellor of the Exchequer speaks at the dispatch box. Where a change in policy or legislation is announced, be it progressive or regressive, tax-raising or rate cuts, it is important that this is clearly signposted in advance. Clients want to know where they stand, and that they have the opportunity to take any action they deem appropriate in advance of any changes making a direct impact to them as individuals or their companies.
Following the Spring Budget where not a lot happened from a tax perspective, there was speculation that the Autumn Statement might be an opportunity for Mr Hunt to set his taxation agenda for the rest of this Parliament and leading into a General Election campaign. Whilst the Chancellor had stated that tax cuts were “virtually impossible” as recently as last week, there was gathering momentum that changes may in fact be coming. Rumours have abounded in recent years that Capital Gains Tax would be raised or even aligned with Income Tax rates – would this be case? Personal Allowances and thresholds are frozen until 2028 – could these be increased? Corporation Tax has increased from 19% to 25% this year – was there scope to bring this back down, given the focus on growth. There was a lot of chatter that Inheritance Tax – ignored for years and not well understood by majority of people – might be reduced.
Therefore, were the Chancellor to implement all of the rumours, that would have created some instability – even if these may be beneficial to clients in the medium term. As it turns out, we need not have worried. There was no mention of CGT, IHT or VAT in the Chancellor’s speech. And even the dreaded look at the underlying documents on the Treasury website did not raise significant concern.
The one giveaway that had been well-trailed was making Full Expensing permanent. FE was introduced in the Spring Budget on a temporary basis, and provides 100% relief for certain capital expenditure in the year in which it was incurred. The backstop date of March 2026 has been removed, enabling Mr Hunt to call this the “biggest permanent tax cut in modern British history”. Whilst no doubt accurate, we would nevertheless encourage businesses to utilise the existing Full Expensing rules and Capital Allowance reliefs now to minimise current corporation tax liabilities, rather than wait for 3 years.
More headline-grabbing were the changes to National Insurance. Class 1 NICs are reduced by 2% to 10%. Class 2 NICs are being abolished, and Class 4 NICs reduced to 8%. Employed and self-employed taxpayers will therefore see an increase in their net income in the coming months. Whilst beneficial, this will not fully offset the fiscal drag caused by frozen allowances and higher inflation. Nevertheless, although my payroll colleagues will not appreciate the January implementation, this should be greatly welcomed by all.
Interestingly, it was notable that the Chancellor clearly equated NICs to income tax, and branded this measure as a tax cut. Admirable, and true to all practical extents – on the other hand, I don’t remember this linkage when National insurance rates were increased previously!
Any Autumn Statement that delivers stability, a headline cut to income tax rates and future corporation tax relief must be commended. Businesses and individuals have greater clarity and confidence today of the tax consequences of any decisions they make – even if they may have to wait until 2026 to reap the benefits.
Follow us as we hear more from our Herald Budget Briefing sponsors over the next few days.
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