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In an Autumn Statement aimed at undoing some of the damage caused by the now infamous mini-budget, Chancellor Jeremy Hunt announced a range of changes that will affect businesses across the country.
Below, we detail the most important policies businesses will need to factor into their budgets.
Business rates
One of the biggest announcements in Hunt’s autumn statement was a £13.6 billion package of targeted business rates support in England, to be spread over the next five years.
According to the Chancellor, the package is designed to “support businesses as they transition to their new bills, protect businesses from the full impact of inflation, and support our high streets.”
This package will include:
- Multiplier freeze:the business rates multipliers, used to calculate how much organisations pay on a business property, will be frozen at 49.9p and 51.2p for the 2023/24 tax year. The government claims this is a tax cut worth £9.3 billion.
- Transitional Relief Scheme:this will cap the size of an organisation’s business rate bill increase once the changes in rateable values take place following the 2023 revaluation. For small businesses the increase will be capped at 5%, while for medium businesses the cap is 15%, and for large businesses 30%.
- Retail, Hospitality and Leisure Relief:support for the retail, hospitality and leisure sectors will be extended in 2023/24. These industries will be eligible for business rates relief of 75%, up to £110,000.
- Supporting Small Business Scheme (SSBS):the smallest businesses losing eligibility or seeing reductions in their small business relief rate (SBRR) or rural relief rate (RRR) will have their bill increases capped at £600 a year from 1 April 2023.
- Improvement Relief:from April 2024 until 2028, businesses will not see an increase in their rates for 12 months if this increase is a result of making qualifying improvements to a property that they occupy.
National Insurance for employers and self-employed
Alongside freezes to the National Insurance contributions (NICs) for employees, the Secondary Threshold at which employers start to pay National Insurance will be frozen at £9,100 from April 2023 until April 2028. This means that, as wages rise, businesses will pay more in NICs, as a greater number of employees will fall into that bracket.
However, the maximum Employment Allowance – which allows employers to reduce their annual National Insurance liability if their Class 1 liabilities were less than £100,000 in the previous tax year – will remain at £5,000. The government says this means 40% of businesses do not pay NICs, and will be unaffected by the freeze.
For the self-employed, meanwhile, National Insurance thresholds have also been frozen, at £11,908 for the Lower Profits Limit and £50,270 for the Upper Profits Limit, until April 2028.
As for the Small Profits Threshold, that will remain fixed at £6,725 for the 2023/24 tax year. The Class 2 NIC rate, meanwhile, will increase from £3.15 per week in 2022/23 to £3.45 a week in 2023/24.
Again this means that you may end up paying a higher rate of tax if your profits increase over the next few years while the threshold remains fixed.
» MORE: What do the changes in National Insurance mean for me?
Income Tax for sole traders
If you are a sole trader, you are required to pay income tax. This meant the Autumn Statement was grim reading for many small business owners up and down the country.
For taxpayers in England, Wales and Northern Ireland, the additional rate threshold (ART) – where you start paying the 45p top rate of income tax – will be lowered from £150,000 to £125,140. This is in stark contrast to former Chancellor Kwasi Kwarteng’s mini-budget, where he tried to scrap the additional rate of tax completely.
The other income tax thresholds, meanwhile, were frozen as they stand until April 2028.
In Scotland, income tax rates are set by the Scottish government. Therefore, while changes could still be forthcoming in Scotland, Jeremy Hunt’s announcement does not apply.
As with National Insurance, this means that if youras wages rise due to inflation, you may end up being pushed into a higher tax bracket, one that has failed to match these inflationary increases.
Corporation Tax
As previously announced, from April 2023 Corporation Tax will increase to 25% for companies with over £250,00 in profits. However, 70% of trading companies will instead pay the Small Profit Rate of 19%.
National Living Wage
From April 2023, the National Living Wage (NLW) – which is the minimum you must pay any employee aged 23 and over – will rise from £9.50 to £10.42 an hour from 1 April 2023. This could mean that businesses need to find an extra £1,600 a year to cover the annual earnings of a full-time worker.
There will also be changes to the National Minimum Wage (NMW), which is bracketed by age group. The NMW will rise from:
- £4.81 to £5.28 an hour for apprentices
- £4.81 to £5.28 an hour for under-18s
- £6.83 to £7.49 an hour for 18- to 20-year-olds
- £9.18 to £10.18 an hour for 21- to 22-year-olds
Capital Gains Tax
The Annual Exempt Amount, i.e. your tax-free allowance, for Capital gains tax will be reduced from £12,300 to £6,000 from April 2023, and again to £3,000 from April 20243. If you are self-employed or a sole trader, you pay capital gains tax whenever you make a profit by selling all or part of a business asset. These assets can include land and buildings, fixtures and fittings, shares, and registered trademarks.
Meanwhile the Dividend Allowance, which is your tax-free allowance for any income related to dividends, will be cut from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
R&D Tax Relief
With the government announcing an increase in public spending on research and development (R&D) to £20 billion a year by 2024/25, Jeremy Hunt also revealed some changes to Research and Development Tax Relief:
- theResearch and Development Expenditure Credit (RDEC)will increase from 13% to 20%
- thesmall and medium-sized enterprises (SMEs) additional deduction will decrease from 130% to 86%
- the SME credit rate will decrease from 14.5% to 10%
» MORE: Small business grants
Windfall tax on energy profits
As a reaction to the large profits made by gas and electric companies thanks to the UK energy crisis, the government announced the Energy Profits Levy will increase from 25% to 35% on 1 January 2023, and be extended until the end of March 2028.
A new, temporary Electricity Generator Levy of 45% will also apply to returns made by electricity generators, and will be introduced from 1 January 2023.
Image source: Getty Images
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