by Alan Stewart, tax partner at MHA’s Aberdeen office
THE Chancellor of The Exchequer delivered his Autumn Statement to the House of Commons on yesterday (Nov 22) against a backdrop of a tough economic and political conditions, albeit with some slight signs of improving inflation rates and a reduction in anticipated government borrowing.
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National Insurance decreases with no changes to income tax rates
The headline grabbing announcement was a 2% cut in employee Class 1 National Insurance Contributions “NIC” from January 6th 2024, the abolition of compulsory Class 2 NIC and the reduction in self-employed Class 4 NIC from 9% to 8% from next April 2024. This will result in annual savings of approximately £415 for the average earner in Scotland and £350 for self-employed individuals.
This will be good news for Scottish taxpayers as although income tax rates and thresholds are controlled by the Scottish Government, NIC rates are controlled by Westminster and therefore the reduction in NIC rates announced by the Chancellor will directly impact Scottish workers.
The Chancellor announced no changes to income tax or thresholds and we will have to wait until December 19th to see if the Scottish Government will follow suit or take steps to ease the tax burden on Scottish taxpayers.
Full expensing of capital allowances
A 100% first year deduction was available for companies subject to UK corporation tax when they incurred expenditure on purchasing new qualifying plant and machinery between April 1st 2023 and March 31st 2026. The good news is that the Chancellor has now announced that this scheme will become permanent which will hopefully lead to increased levels of investment expenditure by Scottish companies.
The Chancellor’s statement will have been met with “cheers” from the Scottish Drinks industry who were subject to a 10.1% rise in excise duties on spirits in August 2023. There had been pre-statement speculation that this could be increased, however, the Chancellor announced that there will be a freeze in alcohol duty until August 2024 which will prove a useful respite for whisky distilleries that account for 25% of all UK food and drink exports.
The Scottish renewable industries had been hoping for infrastructure investment and additional tax incentives and the Chancellor announced extra funding of close to £1 billion to support clean energy manufacturing within the UK which will benefit Scottish businesses.
The oil industry will, however, be disappointed with no announcements made on reducing the energy profits levy which will have an ongoing detrimental impact on the Scottish oil and gas industry. The UK government, however, intends to introduce future legislation to provide relief for payments by oil and gas companies into decommissioning funds where this relates to repurposing assets within oil and gas for use in carbon capture usage and storage purposes.
The Chancellor announced that Freeport tax and Investment Zone reliefs will be extended in Scotland and Wales from five to 10 years and discussions will take place with devolved administrations to implement this change. This will potentially benefit the Scottish green freeports in Inverness & Cromarty Firth, and Forth, and the two Scottish investment zones in Glasgow City Region and the North East of Scotland.
There was also an announcement of a further £80m for new Levelling Up Partnerships to fund regeneration projects in Na h-Eileanan an Iar, Argyll and Bute, Dundee, and the Scottish borders and the UK government will be considering how to extend this programme.
In summary …
The intention behind the Chancellor’s Autumn Statement was to help support businesses, promote investment and provide some relief to taxpayers to reduce the taxes that they pay.
Although more taxpayers are getting dragged into paying higher taxes by frozen tax thresholds, the NIC reductions, the increase in the National Living wage and the increase in Universal Credit of 6.7% from April will help many struggling workers and the hope of the Chancellor will be that the 110 measures he announced will lead to the growth he expects in the UK economy.
From a Scottish perspective the announcements made by the Chancellor should see an increase of £545 million in additional funding and the pressure will now be on the Scottish Government to decide on their spending priorities and how these funds will be used in Scotland.
Alan Stewart is a tax partner at MHA’s Aberdeen office. MHA is the 13th largest accountancy practice in the UK and counts SMEs across a variety of sectors, including energy, as clients.