Autumn statement 2023: Overview for contractors

In the Autumn Statement, the Chancellor Jeremy Hunt set out his plan to promote growth. In this post, we look at the key tax changes that contractors need to know about.

autumn statement

Headlines for contractors

Chancellor Jeremy Hunt’s Autumn Statement contained few shocks. Much of it was already in the press. But I did hold my breath when Hunt finalised his statement with news of support for self-employed people. Would it be a reform of off-payroll rules? Alas, it wasn’t to be and off-payroll (aka IR35), the one reform contractors still need to create fair working terms, was not the trump card.

Instead, Class 2 National Insurance has been abolished amounting to a £192 saving a year. And Class 4 will be cut by 1% to 8% from April. However, this will do very little to close the gap on price and energy inflation. There is still much to do to not only reform off-payroll working but also review umbrella regulation that traps self-employed people in a cycle of unfair contracts.

Additional news for contractors:

  • The “full expensing” tax break will be a permanent fixture. This will allow companies to deduct spending on new IT, machinery and equipment from profits in full, with the ability to claim 25p in every £1 for other IT/innovation expenses. This is of limited direct use to contractors themselves, but it means that large companies should continue to invest in change, indirectly benefiting the contractors who deliver the work.
  • Investment of £500m over two years in new Innovation Centres to create a new AI powerhouse bodes well.
  • The proposed simplified R&D relief could also be a great way for SMEs and self-employed innovators to give their businesses a boost. Over the last couple of years, HMRC has (rightly so) been clamping down on R&D claims. However, small businesses have been facing uncertainty about what they can and can’t claim as R&D, particularly in the software space. We’ll welcome any clarity from the government on this.
  • If you’re a contractor to the retail, hospitality or leisure sector then extending the 75% business rates discount for another year could be good news. It might lead to more stabilisation in these sectors and offset closures.
  • New investment zones in Wales, East Midlands, West Midlands and Greater Manchester are likely to benefit larger businesses in these areas, with a trickle-down effect on contractors. For example, in the East Midlands it’s all about green tech and manufacturing, so Rolls Royce (with their municipal nuclear reactor project) will benefit greatly. This should translate into demand for skills in those areas.
  • From April the National Living Wage will increase from £10.42/hr to £11.44/hr. It will benefit everyone 21 years and older. There are also increases for those 16+ and 18+.
  • State pension payments will be uprated in line with average earnings growth of 8.5% from April. This means that the new State Pension will be worth up to £900 a year more. A good outcome for any contractors thinking of retirement in the coming year, provided your NI payments are up to date.