Chancellor Jeremy Hunt may have billed his Autumn Statement as “the largest business tax cut in modern British history,” but for many the overall tax burden is still rising as allowances are reduced. With many medical professionals preparing to make HMRC payments on account in January, we look at some of Mr Hunt’s key measures as announced in November’s Autumn Statement, and with a general election expected next year, we examine the emerging tax stances of the major parties.

Autumn Statement key measures

The Chancellor’s official papers unveiled 110 measures to “reduce debt, cut taxes and reward work” but did not extend to the reform of the inheritance tax (IHT) system that had been predicted.

Instead, Mr Hunt announced a series of small tax cuts including a boost for those medics who are self-employed in their private practice. Class 2 NICs for the self-employed, normally paid on profits above the current lower profits limit of £12,570, will be abolished. The rate of Class 4 NICs for the self-employed will reduce from 9% to 8% with both measures being introduced in April 2024.

All employed workers will see their National Insurance decrease from 12% to 10% from January 2024. It is more usual for a fiscal change to occur at the start of the tax year in April, which inevitably leads to further speculation about the timing of the next election.

Medical businesses employing staff will see increased practice costs, with the national living wage jumping by 9.8% to £11.44 per hour.

Practices buying equipment and other assets will continue to benefit from “full expensing,” originally due to finish in 2026 but now confirmed as a permanent policy. This allows companies to deduct capital spending on “plant and machinery” from taxable profits.

From April 2024, investors will no longer be limited to contributions in one type of ISA. There will also be allowances for partial transfers of ISA savings. The contribution limit will, however, remain at £20,000 per year.

The Government also confirmed that the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax reliefs are to be extended to 2035. Both schemes support investment in UK start-ups with EIS credited as investing £30bn in over 50,000 companies since its inception. The VCT market has raised over £1,122m in the last year.

The next election

Looking ahead to the next general election, which must be held by January 2025, the key tax battle lines are beginning to be drawn. Precise details are inevitably still vague at this stage, but in general terms, the Labour Party appears to be moving away from its idea of a “wealth tax.” Policy statements have been broad and lacking in detail, but Labour has made clear its desire to close some of the “loopholes” in the tax system, such as the VAT exemption for private schools, non-domiciled tax status and inheritance tax relief for business and agricultural property.

Elsewhere, the pension policy of the two major political parties is also diverging following the changes introduced in the March 2023 budget, which included the abolition of the lifetime allowance regime from 2024. We only have informal statements about Labour’s desire to reverse this decision, but there does appear to be a clear appreciation on both sides of Parliament that the lifetime allowance regime has adversely impacted workforce retention in the NHS. Reinstating the lifetime allowance would be far from simple, and the proposed “carve-out” for doctors looks difficult to achieve in practice.

There is also speculation around Labour’s plans for Business Asset Disposal Relief (BADR). Formerly known as Entrepreneurs’ Relief, BADR provides a beneficial rate of tax when selling or disposing of business assets up to £1 million. This has been a well-used relief for consultants retiring from private practice that had been trading under a limited company. It is possible that Labour will reform or scrap this relief if it comes to power.

Meanwhile, as mentioned above, the Conservatives have been discussing the possibility of making changes to IHT. Further details on the party’s plans may be forthcoming in the Spring Budget next year, with the aim of influencing voters nearer to the time of the election. There are also some calls for broader personal and business tax cuts emanating from within the Conservative Party, but the Autumn Statement demonstrates how difficult these are to achieve in the current fiscal circumstances.

Clearly, it would be extremely unwise to plan based on forecasting the future direction of tax policy. We will continue to work with our clients’ accountants to navigate any actual changes to tax policy and will keep you informed as the election battle lines become clearer.