The Autumn Statement explained: what it means for members

While many announcements in the chancellor’s Autumn Statement hit the headlines, it was disappointing for CLA members and failed to recognise the potential of the rural economy, with thousands of businesses excluded from what were largely urban-centric measures.

Rural businesses have suffered a very high tax burden at the same time as high costs. While some measures, such as cuts to self-employed national insurance, are welcome, they will not help businesses in the countryside to grow.

The chancellor emphasised in his speech that the government was delivering a big tax cut for businesses, but he really was talking about companies. The big tax cut - ‘full expensing’ - is only available to companies and is therefore of little benefit to the many CLA members that operate as sole traders and partnerships.

The CLA has long argued that the tax system needs to be simplified and help the rural economy modernise, thus driving productivity growth. This would mean extending the full expensing regime beyond large corporates, so that rural businesses can benefit, and extending it to include buildings and infrastructure.

The CLA welcomes measures to help speed up the planning system and provide extra funding for house-building – but the government has been talking about planning and housing reform for decades. It now needs urgently to deliver on its promises.

The government is investing an additional £32m across housing and planning to unlock thousands of homes across the country. This includes an additional £5m for the Department for Levelling Up, Housing and Communities (DLUHC) Planning Skills Delivery Fund - a £24m fund was first announced in July 2023 to tackle planning system backlogs and gaps in planning department skills.

Clearing the backlog of planning applications should help future applications be determined more quickly, giving members greater certainty.

In addition, £110m will be made available through the Local Nutrient Mitigation Fund to deliver 40,000 homes over five years. This is funding will support local planning authorities (LPA) deliver nutrient offset schemes, and the CLA hopes it will also enable agricultural development, which has been hindered by the nutrient neutrality issue, to be delivered.

The introduction of a new permitted development right to convert one home into two flats may help create a greater range of homes in rural areas, suited to different demographics in society.

The chancellor also announced a new opportunity for LPAs to recover the cost of major business planning applications, if these applications are determined within a guaranteed quicker determination period. Where they are not determined on time, application fees will be automatically refunded.

While this is positive for large-scale, commercial developments, the CLA hopes this will not result in the prioritisation of these applications against planning applications for homes and development that will support the rural economy.

A commitment to consult on the expansion of electric vehicle charging infrastructure and prioritise the rollout of charging points through the National Planning Policy Framework (NPPF) was also announced. This is welcome, although rural areas will need more factors to be addressed (such as appropriate grid capacity) for real progress to be made.

As part of plans to make it easier to get planning permission to install a heat pump, the government announced that it would consult on introducing permitted development rights in England to remove the blanket ban on installing heat pumps one meter from a property boundary.

Earlier this year, the government consulted on extending VAT zero-rating on energy saving materials to additional technologies in residential buildings (such as battery storage). The CLA supported this change, and in our response, we suggested additional technologies this relief could be extended to.

The government has confirmed that this VAT relief is to be extended, but, other than giving the example of water source heat pumps, it has not published the full list of technologies that will qualify for relief from February 2024.

Relief will also be available to buildings used solely for charitable purposes, as consulted on earlier.

Local Housing Allowance will be unfrozen and increased to the lower 30% of rents in England and Wales from April 2024 onwards. It will give 1.6m households £800 of extra support next year. Where landlords have been supporting low-income households by keeping the rent to the level of Housing Allowance, this increase may enable a more sustainable return (and investment) for landlords without adversely impacting tenants. It will also make rent arrears less likely.

A series of announcements were made regarding business rates:

• The small business multiplier has been frozen for a further 12 months for the 2024/25 financial year.
• The 75% business rates discount for retail, hospitality and leisure businesses has been extended for another 12 months.

The hospitality sector is still experiencing lower revenues caused by real-term reductions in disposable incomes and the cost of living crisis. The measures announced by the government could help soften the impact of the increase in the National Living Wage on the rural hospitality sector.

In the 2023 budget, the government announced new First Year Allowances (FYAs) for companies incurring qualifying expenditure on new plant and machinery on or after 1 April 2023 but before 1 April 2026. These temporary enhanced allowances allow companies to claim:

• 100% FYAs (known as full expensing) on the plant and machinery expenditure that would otherwise qualify for capital allowances at the main pool rate of 18%.
• 50% FYAs on plant and machinery expenditure that would otherwise qualify for capital allowances at the special pool rate of 6%. Special rate expenditure includes, but is not limited to, thermal insulation, integral features and long-life asset expenditure.

The Autumn Statement announced that these allowances are now permanent. Unfortunately, rural entrepreneurs that operate as sole traders or partnerships will not benefit from the full expensing of capital expenditure on plant and machinery. They will continue to benefit from the £1m annual investment allowance.

To encourage investment in rural businesses and to improve productivity, unincorporated businesses should be able to benefit from full expensing.  The capital allowance system should also stimulate investment not just in plants and machinery, but also in modern buildings in which new technologies can more easily be installed. We will continue to campaign for full expensing to be extended beyond companies to unincorporated businesses such as partnerships, and to include buildings and structures.

From 6 April 2024, self-employed members with profits above £12,570 will no longer have to pay Class 2 National Insurance contributions (NICs). They will need to retain access to contributory benefits, including the state pension. More information on what this means will be released next year.

If profits are between £6,725 and £12,570, members will continue to get access to contributory benefits through a National Insurance credit even though no class 2 NICs are paid. After 6 April 2024, it will still be possible for anyone with profits below £6,725 to continue making voluntary payments to access contributory benefits, including the state pension. There is no information on how people with profits above £12,000, how do they retain access. More details will be released in early 2024.

In addition, the self-employed main rate of Class 4 NICs is being cut from 9% to 8% and will take effect on 6 April 2024. This rate applies to chargeable profits between £12,570 and £50,270, with 2% payable on any profits over £50,270.

The rate of employee’s contributions (Class 1 NICs) on earnings between £242.01 and £967 per week will be reduced from 12% to 10%. Employees will benefit from this cut from 6 January 2024. Members will need to ensure that their payroll systems are updated to deal with this change.

Disappointingly, the government did not publish its response to the consultation on the taxation of environmental land management and ecosystem service markets. It is due to give a further update in spring 2024.

The CLA is aware that the uncertainty about the inheritance tax treatment of land taken out of agriculture to deliver environmental land management or ecosystem services is making many members hesitate to change the use of their land. Many members have reported their concerns to us during our Natural Capital Roadshow events. We will continue to urge the government to change the law to provide the reassurance members need to deliver for the environment.

Three new investment zones have been created in the West Midlands, East Midlands and Greater Manchester, focusing on manufacturing.

There will be two new investment zones in Wales: one covering Cardiff and Newport and one covering Wrexham and Flintshire.

While these new investment zones highlight the government’s desire for greater devolution, it is unclear how this will filter down to rural areas. There is an urban bias towards extending devolution and its financial benefits, and there appears to be little to no advantage for rural businesses and rural communities.

The government announced a £50m fund over two years that will increase the number of apprentices in engineering and other key growth sectors.

Apprenticeships can help address the labour shortage experienced by many rural businesses. To truly support the rural economy, this fund needs to be channelled to those sectors where labour availability is hampering growth. The CLA will be stressing the importance of apprenticeships for land-based businesses as well as rural hospitality businesses.

A £10m fund will be made available to support the Veterans Places, People and Pathways Programme.

NICs relief for employers of eligible veterans will be extended for one year. This means that businesses will not pay employer NICs on annual earnings up to £50,270 for the first year of employing a veteran.

This will help rural businesses that are looking to employ veterans and supports the CLA’s Veterans Initiative, which actively encourages CLA members to employ veterans.

The new connections action plan was promised by the government in March 2023, so we welcome its publication and recommendations.

With a 500GW connections queue across the transmission and distribution networks (five times the amount currently connected) and projects being quoted exorbitant sums and timescales stretching well into the 2030s to connect, the current situation is limiting decarbonisation. The move away from the ‘first come, first served’ approach to queue management is long overdue. It will help generation projects that are ready to connect sooner rather than having to wait behind more speculative projects which have ‘booked’ grid capacity but don’t have land or finance in place.

The government has published a ‘Transmission acceleration action plan’ to speed up the planning process for new pylon lines and network infrastructure.

The CLA recognises the need to expand the electricity grid at scale to meet predicted rise in power demand and supply, and the desire to speed up consenting and delivery. Grid investment is essential, but without proper co-ordination and planning, the many more miles of wires and pylons needed could severely disrupt the businesses which operate from the land over which they go. To achieve faster infrastructure delivery, the government must also improve the system of consultation with and compensation of affected landowners.

The plan’s proposals for local community benefits and electricity bill discounts for properties closest to transmission network infrastructure are a step forward but much depends on the detail of how they will be implemented and eligibility.