The Chancellor announced that his Autumn Statement would be one for growth, promising to cut taxes for businesses. Indeed, he claimed several times during his speech that he had unveiled ‘the largest business tax cut in modern British history’.
It is true that for large businesses, the decision to make full expensing permanent represents a significant benefit, and one which will hopefully give a boost to investment. But given the nature of businesses in our part of the world, does yesterday’s announcement add up to the seismic change Mr Hunt claims?
Full expensing really only affects big companies (the existing £1 million Annual Investment Allowance is available to all businesses already). Meanwhile, the abolition of Class 2 national insurance, and the cutting of Class 4 NICs to 8%, will only benefit self-employed individuals rather than the owners of limited companies. Indeed, there was little comfort offered to incorporated, owner-managed businesses, which make up the backbone of our region’s economy.
The extension of the 75% business rates discount for leisure, hospitality and retail is certainly welcome, as these sectors are important local employers. But their biggest expense is people, and the 9.8% increase in the National Living Wage will add cost, not just at the lower end, but with a knock-on effect right across the wage structure.
Add to that the fact that employer national insurance thresholds are currently frozen until 2027/8, and employing people is once again about to get much more expensive.
Inevitably in the year before a
general election, this was a very political Autumn Statement, and it will be
followed by a political Budget in the spring.
The reality is that incorporated businesses don’t have a vote, so they
will always be low on any Chancellor’s pre-election priority list.
Owner-managers of incorporated businesses may be feeling that the need to review whether it is still worth taking their income in dividends, or whether they should simply pay themselves a salary – with rising corporation tax, increased dividend tax and reducing national insurance, the gap is certainly closing. Don’t overlook, though, the cashflow benefits to the dividend route. Some may be wondering whether to unincorporate entirely and become fully self-employed (or work as a partnership).
But the reality is that we may well have another government in 2024, so I would advise not rushing into any such decision – even if it does feel like yesterday’s statement is the latest in a long line of fiscal events which seem determined to discourage rather than encourage the very businesses which are the engine room of our local economy. The important point is to take good advice so you can react quickly to an ever-changing economic playing field.
Nutrient Neutrality
The announcement of £110 million in new funding to help create mitigation schemes for Nutrient Neutrality will be welcomed by the construction sector in our region, which is one of the areas most impacted by the effective moratorium on new house building.
Several building company bosses have spoken out about the potential impact on their businesses of the deadlock, with thousands of construction jobs potentially on the line.
The Chancellor will be very aware that the House of Lords blocked an attempt to overturn the restriction on new homes being built in affected areas, and this move is perhaps politically motivated – but nevertheless it is good news for Norfolk if it succeeds in unlocking much-needed new house building.
It is unclear how the money will be spent, and where it will be channelled. Our county has seen innovative partnerships between local authorities and the construction sector in trying to find a solution, and it will be important that any financial support is targeted at those existing collaborations, rather than trying to create new initiatives.
Pensions
The Chancellor announced a call for evidence for new employees to be given the legal right to ask for employer pension contributions to be made to their existing pension fund, rather than one created by the employer, will be welcomed by individuals struggling to keep track of a host of different pension pots amassed during their working life.
Following any rollout, it will be important for employees to understand whether they will be better off asking for employer contributions to go into an existing fund, or to join the employer’s own fund, so taking independent financial advice will be vital.
The move may, however, create more bureaucracy for employers, who now face potentially having to make contributions to myriad different schemes on behalf of their employees.
Existing pensioners will no doubt be welcoming their 8.5% increase in the state pension, but those at the start of their working lives could be waiting half a century or more before they even receive that benefit. So pension planning throughout one’s working life is more important than ever, and anything which simplifies that process is a bonus.