Autumn Budget 2024 – Key takeaways

After months of speculation, the hotly anticipated Autumn Statement has been handed down by the new Chancellor. Warnings of a “painful” budget were perhaps overstated for many individuals, but they certainly rang true for businesses.

Some of the key take aways of this budget included:

Employers National Insurance

This was perhaps the most attention grabbing change. While Employee Tax and NI will remain unchanged, Employers National Insurance will increase from 13.8% to 15%, and they will see their Secondary threshold drop to £5000 p/a.

This will prove a costly measure for many employers, but this may also have impacts on the contractor market as those who engage self-employed individuals or limited company contractors will see their potential liabilities significantly increase.

HMRC improvements

The government re-affirmed its commitment to hiring an additional 5,000 compliance and 1,800 debt recovery individuals within HMRC, meaning tax compliance should be at the forefront of all businesses over the next few years.

This is coupled with investment into HMRCs digital infrastructure to improve HMRC’s efficiency and service delivery and plans to modernise and mandate tax advisor registration.

Alongside these measures also comes commitment to tackling off-shore non compliance by increasing resources and scaling up of compliance activity as well as two consultations: one on options to increase HMRC powers to tackle tax advisors who promote tax avoidances schemes, and the second to review HMRC powers and processes.

We are already seeing an increase in HMRC compliance activity and these measures support what we had already predicted: that we will be seeing an significant increase in HMRC nudge letters and enquiries.

Umbrella companies

Umbrella company employers, and those who engage them, have additional concerns. Following years of consultation, the government has committed to tackling non-compliance within umbrella companies and is seeking to impose measures which will push responsibility (and potential liability) up the chain to the party engaging the umbrella company.

Seemingly wasting no time, the policy paper has already been released and details of the government’s plans can be found here: Tackling non-compliance in the umbrella company market - GOV.UK (www.gov.uk).

Umbrella companies have already been on alert awaiting the government’s plans and today certainly signals the time for umbrella companies, and those who contract with them, to focus on compliance to ensure their house is in order before it is too late.

With so many tax changes announced, many business would be forgiven for not noticing any of the positive (or absent) provisions. On the plus side we can see:

R&D tax relief

There were no significant legislative changes to the R&D tax relief regime in the Autumn Budget. With the announcement that fiscal events will take place annually, businesses will be hoping this brings a much-welcomed period of stability for an area of tax that has been under intense recent scrutiny. The government has announced it will discuss with stakeholders widening the use of the advanced assurance scheme with a further consultation in Spring 2025.

Since the widespread error and fraud in claims was flagged by the mainstream media in late 2022, HMRC have significantly increased their compliance efforts whilst recent legislative changes by the previous government have reduced the value and attractiveness of the scheme.

Much has been written over the last two years with repeated concerns by the tax advisory community of the self-titled “volume compliance” approach. There is a question of whether the strain placed on businesses in defending strong and legitimate R&D claims is proportionate.

There are signs however that the increased compliance activity is having the desired effect. The latest published HMRC R&D statistics show a marked decline in claims across the SME scheme, which has been the focus of recent compliance efforts. Whilst the number of RDEC claims reduced by 9% the number of claims made under the SME fell by 23% on the previous year, falling to levels not seen since 2018-19. There have been marked reductions in the number of claims made in sectors which less obviously lend themselves to R&D claims, including wholesale and retail trade, accommodation, and real estate.

The government’s decision today perhaps reflects a desire to wait further to assess the longer term impact of the recent compliance activity, and whether it will continue to discourage poor-quality claims.

Self-employed status

While employers, umbrellas and engagers were hot on the agenda, the self-employed status and single worker status reforms were notably absent from the budget report – with so many priorities in play it would seem, for now at least, the law on self-employed status will have a reprieve.

There is no doubt that this has been the most ‘eventful’ budget for quite some time, and there will be much to digest and plan for in the next few months. Should you or your clients need any assistance with any of the above, please get in touch with us at taxconsultancyuk@markel.com.