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The Autumn Statement in the Chancellor's red briefcase | AccountingWEB | Autumn Statement kick-starts Chancellor's tax cuts
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Autumn Statement kick-starts Chancellor’s tax cuts

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Chancellor Jeremy Hunt today used his Autumn Statement to deliver a fiscal pick-me-up for the Conservative backbenchers at the start of an election year with a 2% cut to national insurance, and making the full expensing capital allowance scheme permanent.

22nd Nov 2023
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This afternoon’s Autumn Statement was somewhat of a step change compared to the sobering state of the economy this time last year, where the Chancellor then used his fiscal speech to brace the UK for the “storm” of tax rises. 

But after having been handed a fiscal windfall of about £26bn to play with after inflation fell to 4.6% in October, Hunt was today able to turn his attention to cutting taxes.   

With the Conservative government lagging in the opinion polls, and an election next year, Hunt took a punt at changing the fiscal narrative with “110 growth measures”, including a 2% cut to the main rate of national insurance from 6 January alongside confirming incentives to encourage business investment such as permanently extending the full expensing initiative. 

For the self employed, Hunt also abolished class 2 national insurance and cut class 4 national insurance from 9% to 8%. 

As for individuals, he also confirmed that the national living wage will increase for 23-year-olds and over to £11.44 per hour from April. 

“We cut taxes to help bigger businesses invest, we cut taxes to help smaller businesses grow. We cut taxes for the self employed and keep our country running and from January we cut taxes for 27m working people whose hard work drives our economy forward,” said Hunt.

“We are delivering the biggest business tax cuts in modern British history. The largest ever cut to employee and self employed national insurance and the biggest package of tax cuts to be implemented since the 1980s. An autumn statement for a country that has turned a corner. An autumn statement for growth which I commend to the House.” 

The speech may have done more to answer the restless calls from the backbenches for tax cuts than was expected a few months ago, but Hunt did hold off from announcing any changes to inheritance tax or a 1% cut to income tax, despite much media speculation, leaving those rabbits to be potentially pulled out of the hat in the pre-election Spring Budget.  

Tax measures

Among the tax measures Hunt announced in response to having a more-generous-than-expected fiscal headroom were: 

  • Main rate of national insurance cut to 10%
  • abolishing class 2 national insurance contributions (NIC) 
  • a 1% cut to class 4 NIC 
  • a permanent extension of the full expensing capital allowance scheme
  • national living wage increased for 23-year-olds and over to £11.44 per hour
  • freeze all alcohol duty until 1 August 2024
  • increase state pension by 8.5%
  • confirmation of the new merged research and development (R&D) scheme
  • freeports extended for another five years
  • 75% business rate discount for retail, hospitality and leisure extended until 2025
  • tax relief for visual effects expenditure

National insurance

The Chancellor left the cut to employee national insurance from 12% to 10% until the end of the speech. In a surprising twist, and probably much to the chagrin of payroll software providers, Hunt said the cut will be rolled out from 6 January 2024. 

The Chancellor said the cut to class 1 NICs will benefit 27m workers and the average worker in 2024/25 will pay over £1,000 less in personal tax than they otherwise would have done. 

The cut to national insurance comes only a couple of years after the government hiked the tax by 1.25% with the addition of the health and social care levy.

Hunt turned his attention to the self-employed national insurance contributions. He first abolished class 2 national insurance and then cut class 4 national insurance from 9% to 8%. He said these reforms would save around 2m self-employed people an average of £350 a year for the average person earning £28,200. 

Individuals

In order to encourage more UK investment, Hunt also announced big changes to ISAs. The reforms, dubbed the biggest in more than a decade, will change rules around fractional shares and long-term asset funds. The simplification comes ahead of an increase to the £20,000 threshold of the tax-free savings allowance. 

Hunt also confirmed that the national living wage will increase next April from £10.42 an hour to £11.44 per hour. The minimum wage increase will be welcomed by lower earners, but could add further strain on struggling businesses

When the rate increased in April, accountants raised concern that with insolvencies at a 13-year high, some businesses may need to “closely monitor and improve cash generation to survive”. 

PracticeWeb Autumn Statement 2023 Covers

Business investment

The Chancellor was keen to position business investment as one of the key pillars of the Autumn Statement. 

The higher-than-expected tax receipts enabled him to confirm that the full expensing relief will be permanent going forward, since the proposal was set to only run two more years. 

He said the extension of the relief, which provides cashflow for large-scale investment, will provide businesses with the confidence to make long-term investments beyond the original end date of 2026.  

“This is the biggest ever boost for business investments in modern times. A decisive step towards closing the productivity gap with other major economies and the most effective way we can raise wages and living standards,” said Hunt. 

While the business community welcomed the certainty that came with the announcement, Emma Rawson from the Association of Taxation Technicians noted that it does very little for the vast majority, seeing that it’s only for companies and not sole traders or partnerships.  

“‘Full expensing’ isn’t quite what it sounds like – many assets are still excluded. This includes the obvious like land and buildings, but also includes cars, and assets bought for leasing,” she wrote on X, formerly Twitter.

“There’s also a sting in the tail of full expensing – if you later sell the asset, a standalone balancing charge arises. In other words, the proceeds are taxable. This means that some relief might be clawed back in the future, and you’ve also got to keep track of the assets carefully.”

Elsewhere, Hunt confirmed that he is simplifying the R&D tax relief, with the much-expected merger of the R&D expenditure credit and small or medium-sized enterprise (SME) scheme. He expanded that the merged scheme will “reduce the rate at which loss-making companies are taxed within the merge scheme from 25% (as per the current RDEC scheme) to 19%”. 

Investment zones also made an appearance. Hunt confirmed that he will extend the scheme and the tax reliefs for Freeports from five to 10 years. There will also be three further investment zones in the West Midlands, East Midlands and Greater Manchester.  

Economy

The Chancellor emphasised throughout the speech how the announced initiatives and tax cuts were aimed at boosting economic growth. 

Expectedly, Hunt highlighted at the start of the speech the fall in inflation from 11.1% to 4.6%. He said the Office for Budget Responsibility (OBR) has forecasted that headline inflation will fall to 2.8% by the end of 2024 before falling to the 2% target in 2025. 

“I will not take risks with inflation and the OBR confirmed that the measures I take today make inflation lower next year than it would otherwise have been,” said Hunt.  

Turning to the prime minister’s pledge to reduce debt, Hunt said that debts were predicted to rise to be almost 100% of GDP by the end of forecast, but the economy has “outperformed expectations”. 

According to the OBR, he said underlying debt will be 91.6% of GDP next year, 92.7% in 2024/25, 93.2% in 2026/27, before falling in the final two years of the forecast to 92.8% in 2028/29.  

He said the OBR expects the economy to grow by 0.6% this year, 0.7% next year and then rising to 1.4% in 2025. 

The devil will be in the detail, but Hunt also revealed that he will provide HMRC with the resources it needs to ensure tax compliance, which he said would raise an additional £5bn across the forecast period. Although he didn’t say whether this is new funds. 

Rabbits hibernating for Spring Budget?

The Autumn Statement ended up being more eventful than previously expected. But as Giles Mooney, the director at PTP Training, said on X, formerly Twitter: “A reminder that, if the election is May, purdah prevents anything meaty in the Spring Budget having time to be passed. So this is his last chance.”

However, as is often the case, these fiscal statements are more newsworthy for what was not included rather than what was. In the weeks leading up to the Autumn Statement, there had been a lot of noise generated about inheritance tax. The Chancellor opted against tackling this contentious tax this time around. 

However, Hunt could be saving his plans to either reduce the rate or abolish the tax altogether until the Spring Budget or as an election manifesto. A cut to inheritance tax now could have blown back at the government, especially with lower and middle earners still feeling squeezed from the cost-of-living crisis. 

Also missing from the Autumn Statement was any further news on stamp duty land tax (SDLT). Jason Croke, a director at Rayner Essex and regular AccountingWEB contributor, highlighted the lack of SDLT announcements in the Budget earlier this year, since changes are eventually expected after the HMRC consultation. 

Again, the Chancellor may wait until the spring to make any bold changes to SDLT. As Tom Evenette from EY pointed out before the Autumn Statement, there is no urgent need to make any further changes since an increase to duty thresholds introduced last year will remain in place until 2025. He added that “the post-pandemic stamp duty cut received criticism for contributing to a temporary housing market price bubble that accounted for the duty cut ahead of the deadline.”

Visit our dedicated Autumn Statement 2023 hub here to find all related articles from our experts.

Replies (42)

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By SXGuy
22nd Nov 2023 13:38

I thought class 4 was currently set to 9.73 percent?

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Replying to SXGuy:
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By mkowl
22nd Nov 2023 13:44

The very convuluted average rate for the 22/23 tax year only

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Replying to SXGuy:
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By Mr Hankey
22nd Nov 2023 13:45

Class 4 NI is 9%

During 2022/23 it was 9.73%

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Replying to SXGuy:
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By CMYC
22nd Nov 2023 13:47

2023/2024 is 9% but understand why you confused...our brains are focused on 2022/2023 tax returns and rates. :)

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By SuperAccountingSteve
22nd Nov 2023 13:41

I suppose NMW increases are a quasi tax, but a tax rise for businesses. The gov talk about it, as if its something theyre giving rather than taking away from business owners.

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By norstar
22nd Nov 2023 13:46

Stagnant house market - SDLT break for downsizing needed and not provided. Class 2 NI scrapped - pointless. NI decrease - does nothing for incorporated business. Investment relief - does nothing for most SMEs. Finally, an NI cut rushed through just complicates things yet again and smacks of a bribe ahead of an expected election call in 2024.

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Replying to norstar:
By Nick Graves
22nd Nov 2023 14:36

norstar wrote:

Stagnant house market - SDLT break for downsizing needed and not provided. Class 2 NI scrapped - pointless. NI decrease - does nothing for incorporated business. Investment relief - does nothing for most SMEs. Finally, an NI cut rushed through just complicates things yet again and smacks of a bribe ahead of an expected election call in 2024.

Scrapping Class 2 was the only inspired move in the whole thing actually - the whole C2 system's become a fustercluck in recent years.

Any form of tax simplification - however trivial - is to be applauded.

Now to eliminate the rest...

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By mkowl
22nd Nov 2023 13:50

Taking the politics out of it - hard not to but - then I am a supporter of supply side reforms as a means of kick starting the economy

But you get to grim realities of the likes of apprenticeships. My wife's nephew started one in September in engineering then alongside 4 others mercilessly dumped overnight by the company. Now drifting as the college sector don't respond to enquiries, other govt bodies shrug their shoulders. Talk is cheap

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By DavidWinter
22nd Nov 2023 13:51

And for small limited companies who have been squeezed since 2010, alongside the public during the austerity period, while big companies had their tax cut in half? What's for them?

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By msas
22nd Nov 2023 13:53

No mention of employers' NIC rates. With national minimum wage increases that will cost employers even more. The small business owners are struggling as it is, surely this will result in more of them going to the wall or having to reduce the number of employees.

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Replying to msas:
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By msas
22nd Nov 2023 15:12

* not withstanding the Employment allowance for those who qualify

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Replying to msas:
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By norstar
22nd Nov 2023 15:31

Quite clear to me that Rishi and now Jeremy, both view small business as nothing other than a group of people out to abuse the system and who should pay employee rates of tax and NI. Every single policy they've come out with since COVID seems targeted to do nothing but make things harder for this size of business.

If you're cutting employee NI and Class 4 and you want to encourage growth and mobilising the workforce, why would you do nothing to reduce the cost of doing so?

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Replying to msas:
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By norstar
22nd Nov 2023 15:31

Quite clear to me that Rishi and now Jeremy, both view small business as nothing other than a group of people out to abuse the system and who should pay employee rates of tax and NI. Every single policy they've come out with since COVID seems targeted to do nothing but make things harder for this size of business.

If you're cutting employee NI and Class 4 and you want to encourage growth and mobilising the workforce, why would you do nothing to reduce the cost of doing so?

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By Postingcomments
22nd Nov 2023 13:55

https://www.gov.uk/government/collections/autumn-statement-2023-tax-rela...

Here are the tax docs. I always have trouble finding them (maybe that's just me) so thought I'd post a link

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By petercooperuk
22nd Nov 2023 14:01

Hands up the number of accountants who actually serve companies spending >£1m a year on plant and machinery. Full expensing benefits a single digit percentage of companies.

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Replying to petercooperuk:
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By mkowl
22nd Nov 2023 14:29

petercooperuk wrote:

Hands up the number of accountants who actually serve companies spending >£1m a year on plant and machinery. Full expensing benefits a single digit percentage of companies.

I have one that might benefit !

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By johnjenkins
22nd Nov 2023 14:04

IMHO this will not kick start the economy nor will it do anything for growth. I do believe it's time for fresh thinking, however unless you get someone like Nigel Farage in charge it's going to be "same old same old". Jeremy was very bright with his presentation, however I think Raquel knocked him for six. At this moment in time I do not think that any Government will do any good. It really is time for something fresh. With all the tech and AI going on you'd think someone would come up with new ideas.

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By SteveHa
22nd Nov 2023 14:06

Tucked away early on was a commitment to ensure HMRC has adequate resources, but no detail.

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Replying to SteveHa:
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By NewACA
22nd Nov 2023 14:27

Probably a euphemism for Making Tax Digital.

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Replying to NewACA:
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By mkowl
22nd Nov 2023 14:29

NewACA wrote:

Probably a euphemism for Making Tax Digital.

Good news one of the press releases mentions our favourite topic and mandation !

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Replying to SteveHa:
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By MJShone
22nd Nov 2023 16:50

Adequate resources to collect more tax - see 2.25 of the Green Book.

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By BHConsulting
22nd Nov 2023 14:23

How will low earners with Self Employment profits under £6,725 be able to claim a qualifying year for the state pension which they can do now using voluntary Class NICs?

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Replying to BHConsulting:
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By NewACA
22nd Nov 2023 14:29

Ditto for ministers of religion, they don't pay Class 4 NI.

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Replying to BHConsulting:
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By Paul Morton
22nd Nov 2023 14:30

From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2, but will continue to receive access to contributory benefits including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the state pension through a National Insurance credit without paying National Insurance contributions as they do currently. Those with profits under £6,725 who choose to pay Class 2 voluntarily to get access to contributory benefits including the state pension will continue to be able to do so.

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Replying to Paul Morton:
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By mkowl
22nd Nov 2023 14:32

Paul Morton wrote:

From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2, but will continue to receive access to contributory benefits including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the state pension through a National Insurance credit without paying National Insurance contributions as they do currently. Those with profits under £6,725 who choose to pay Class 2 voluntarily to get access to contributory benefits including the state pension will continue to be able to do so.

So not fully abolishing Class 2 by the sounds of it

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Replying to Paul Morton:
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By BHConsulting
23rd Nov 2023 11:46

Thanks Paul, I have also now seen this in some further details published today.

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Replying to BHConsulting:
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By mkowl
22nd Nov 2023 14:31

BHConsulting wrote:

How will low earners with Self Employment profits under £6,725 be able to claim a qualifying year for the state pension which they can do now using voluntary Class NICs?

Class 3 at £17.45 per week

Bargain

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Replying to BHConsulting:
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By agillies
23rd Nov 2023 10:04

Same pay voluntary

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By John Wheeley
22nd Nov 2023 14:32

If there's no Class 2 NI, how will entitlement to State Pension be calculated?

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Replying to John Wheeley:
By Nick Graves
22nd Nov 2023 14:37

John Wheeley wrote:

If there's no Class 2 NI, how will entitlement to State Pension be calculated?

It won't...probably.

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Replying to Nick Graves:
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By Paul Morton
22nd Nov 2023 15:18

https://www.gov.uk/government/publications/autumn-statement-2023-overvie...

See paragraph 2.1. Class 2 hasn't been abolished

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By PChapman
22nd Nov 2023 14:44

All carefully calculated to not give much away but seem like they're helping out... almost as if there's an election round the corner...

to be fair knocking class 2 on the head makes sense - based on my experience of HMRC knocking it off returns then adding it on again and the resultant queries it no doubt is costing more than it brings in!

As always the devil is in the detail and there will no doubt be easter bunnies jumping all over the spring budget as we gear up for an election

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By listerramjet
22nd Nov 2023 14:48

you get the impression he doesn't want to see a conservative victory at the next election!

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Replying to listerramjet:
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By johnjenkins
22nd Nov 2023 15:21

He won't be there. Raquel actually said Rishi's got his eye on someone else cos Jeremy won't be standing at the next election. Perhaps Nigel will come out of the jungle with a jaguar straight into no. 11.

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By vstrad
22nd Nov 2023 14:54

Yes, Jeremy, "the biggest business tax cuts in modern British history", just 6 months after the biggest increase. Confused or what?

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Replying to vstrad:
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By Open all hours
22nd Nov 2023 15:21

A year ago he bought his 2023 diary and it was blank.
Last week he bought his 2024 diary and it had a date marked ‘General Election’.

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Replying to vstrad:
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By johnjenkins
22nd Nov 2023 15:22

How to make a catastrophe into a disaster.

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By ireallyshouldknowthisbut
22nd Nov 2023 15:54

Regardless of the "tax cuts" surely the real story here is fiscal drag

The % tax take used to be around 33%, its now 37% and rising. This has shaved off 0.5% according to the red book.

The NI drop is a gimmick given its barely covers the inflationary change on the personal allowance being frozen, and even then at 50k. model at 30k and its well down.

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By norstar
22nd Nov 2023 16:11

I see they have resurrected the disclosure of dividends from your personal company: "employers will be required to provide more detailed information on employee hours paid via Real Time Information PAYE reporting. Secondly, shareholders in owner-managed businesses will be required to provide the amount of dividend income received from their own companies separately to other dividend income, and the percentage share they hold in their own companies via their Self Assessment return"

More fishing.

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By FactChecker
22nd Nov 2023 18:49

"For the self employed, Hunt also abolished class 2 national insurance"

... that may be what Hunt said in the Commons, but the email just issued by HMRC says:
"from 6 April 2024 self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs.
Arrangements for those paying NICs voluntarily are unchanged, and the government has also frozen Class 2 and Class 3 NICs rates at their 2023 to 2024 levels for 2024 to 2025."

So not exactly 'abolished' then ... a bit like Osborne's infamous 'death of the tax return'!

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By BKnoxy
22nd Nov 2023 21:38

Shareholder Directors of Ltd companies incurred an increase of 1 25% in dividend tax when the NI rate increased by a corresponding % last year. Now the NI rate has reduced by 2% is there any corresponding reduction in the dividend tax? Probably not......

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Replying to BKnoxy:
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By norstar
27th Nov 2023 09:28

no, because they hate small business.

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