Mark Savage, Tax Director at BDO in Guernsey, provides his commentary on today’s UK Autumn Statement from Jeremy Hunt, Chancellor of the Exchequer.
Mark notes that “The UK Chancellor was able to announce that the UK inflation was falling, borrowing was predicted to be less than previously thought and economic growth higher than previously predicted. This enabled him to announce ‘110 measures’ to boost growth. Most of these measures were unrelated to tax. Some were focussed on spending and others on maintaining the income of individuals, such as maintaining the pensions ‘triple lock’ and raising the minimum wage.
A major focus continued to be looking at ways to incentivise the ‘economically inactive’ to remain in, or rejoin, the UK’s workforce by ‘making work pay’. This is intended to be achieved through reforms to the benefits system as well as changes aimed at the lower paid such as maintaining the pensions ‘triple lock’ and raising the minimum wage.
Inheritance Tax
Despite speculation in the media in advance of the Autumn Statement, no major changes were announced to the UK Inheritance Tax rules. Individuals who hold UK assets or otherwise remain subject to UK Inheritance Tax will note that the current tax-free threshold continues to be frozen at £325,000. The continued effect of inflation means that these frozen allowances may lead to an increased number of Guernsey residents facing UK tax liabilities.
UK Business
A notable change which may be of interest to Guernsey individuals with interests in UK businesses include the extension of full expensing regarding capital allowances. This was originally brought in the Spring Budget earlier this year and was expected to last for the next three years but has now been made permanent. The effect is that companies incurring qualifying expenditure on the provision of new plant and machinery can claim an allowance at a rate of either 100% (main rate expenditure) or 50% (special rate expenditure).
Non-incorporated businesses can continue to claim a first-year allowance of up to 100% (equivalent to full expensing) on plant and machinery purchases up to £1 million.
National Insurance
The Chancellor also introduced eye-catching measures affecting those who work, and are therefore potentially subject to National Insurance, in the UK. Employees will benefit from a 2% reduction in their Contributions. Meanwhile the Self-employed will similarly benefit from a 1% reduction, in addition to the abolition of the fixed weekly “Class 2” contributions.
It should be noted, however, that this reduction in headline rates has been partly paid for by the freezing of lower income limits and allowances, which have not, therefore, kept pace with inflation. For some low earners this freezing of allowances and limits may offset the benefit of the rate reduction.
Captive Insurance
One potentially interesting future development amongst the non-tax measures announced by the Chancellor today is that there will be a Consultation on introducing a UK regime for captive insurance companies launching in Spring 2024.
Whilst this is an interesting development , it will be interesting to see if the UK will be able to compete against the well-established, well-regulated and potentially more tax friendly jurisdictions such as Guernsey.