Connor Campbell
Duncan Ferris
The Autumn Statement 2023 from Chancellor Jeremy Hunt makes a difference to many small businesses across the country. This year’s changes might not quite match up to the sweeping measures brought in last November, but there is still plenty to dig into.
Below, we detail the most important policies small businesses will need to factor into their operations and planning.
Business Rates
One announcement from the Autumn Statement that may attract your attention is a new business rates support package. This set of measures, which apply to businesses in England, is worth £4.3 billion over the next five years.
This is not as comprehensive as the package unveiled last year, but there are still updates to take note of.
Jeremy Hunt said in his Autumn Statement speech that his changes were a demonstration that the government is “backing small businesses” and acknowledging business owners’ frustration with paying tax before making any profit.
This includes the following measures:
- Multiplier Freeze: The small business multiplier will be frozen at 49.9p. This applies to businesses with a rateable value of less than £15,000 and is usually only applicable to companies with a single property.
- Standard Rate Hike: Standard rates have been pushed higher from 51.2p to 54.6p, in line with Consumer Price Index figures from September.
- Retail, Hospitality and Leisure Relief: Support for the retail, hospitality and leisure sectors will continue in 2024/25. This means businesses in these industries will be eligible for business rates relief of 75%, up to £110,000.
» MORE: What are business rates?
National Living Wage
From April 2024, the National Living Wage (NLW) will rise from £10.42 to £11.44 an hour from 1 April 2024. Additionally, eligibility for the NLW has widened to include any employee aged 21 and over. This could mean that businesses need to find an extra £1,800 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:
- £10.28 (for over 21-year-olds) and £10.42 (for aged 23 and over) to £11.44 for over 21-year-olds
- £5.28 to £6.40 an hour for apprentices
- £5.28 to £6.40 an hour for under-18s
- £7.49 to £8.60 an hour for 18- to 20-year-olds
- £9.18 to £10.18 an hour for 21- to 22-year-olds
National Insurance
Under the banner of “cutting taxes and rewarding hard work”, Hunt also announced a cut to National Insurance contributions.
Class 1 employees, who are those under state pension age and earn more than £242 each week from their job, have seen their National Insurance main rate cut from 12% to 10%. Meanwhile, there will be a cut for the self-employed too, with their main rate reduced to 8% from 9% from 6 April 2024.
In addition, the lower earnings limit has been frozen at £6,396 – this is the point when employees can start claiming National Insurance credits. There were no changes to National Insurance rates for employers.
But what does this mean for business owners?
- Payroll Changes: New National Insurance rates come in from 6 January 2024, so be sure to alter payroll processes. This will save you from having to make corrections down the line.
- Self-Employed: If you’re registered as self-employed, your National Insurance payments are going down when changes come into force in April 2024. According to government figures, the average self-employed worker (earning £28,200 per annum) will take home £350 extra per year.
» MORE: What do changes in National Insurance mean for me?
Capital Allowances
Next, there are changes to capital allowances. Capital allowances are a form of tax relief that let businesses deduct the value of certain items from their profits.
While the Spring Budget saw full expensing through to 1 April 2026, Hunt’s Autumn Statement saw this made permanent. This means that the costs of qualifying machinery and equipment can be written off.
However, there is no approved list of qualifying items for business owners to refer to. Instead, the items you can claim for will vary depending on the nature of the business in question.
However, there are some guidelines on the sort of items that fit the criteria:
- Essential items: Items or machinery that are essential to a business, such as vehicles.
- Integral features: This might include lifts, escalators, heating systems, lighting and air conditioning.
- Building fixtures: Bathrooms, kitchens, alarm systems and security cameras.
- Alterations to premises: Changes to a property to install new features or fixtures.
- Demolition: Costs of destroying or removing qualifying machinery and equipment.
Meanwhile, items that do not qualify include buildings, structures, leased items and land. However, the government is seeking to further simplify capital allowances in future, with particular attention being paid to extending the relief to leased items.
Tax changes for small businesses
While business rates and National Insurance made the headlines, Hunt’s Autumn Statement carried news of several tax changes aimed at making tax simpler for small businesses.
First off is a measure that will have an impact on self-employed businesses and partners with trading income. The government is pushing ahead with efforts to make cash basis the default means of calculating profits for income tax purposes. More businesses will be able to use the measure too, as restrictions based on turnover will be removed.
Default cash-based accounting could make life easier for small businesses, as it only requires you to declare money flowing into or out of your account.
Qualifying businesses do have the option to do this right now, but they must opt in. From the start of the new tax year on 6 April 2024, it will become the norm.
Changes to the government’s Making Tax Digital (MTD) initiative for income tax self-assessment are next on the agenda. These include streamlining the design of mandatory quarterly updates and removing the need for End of Period statements.
While these changes will not come into effect until April 2026, the updates serve as a reminder for businesses to ensure they use MTD-compliant software or accounting methods.
» MORE: What is Making Tax Digital?
R&D Tax Relief
The budget also included the announcement that it will merge the R&D Expenditure Credit (RDEC) and SME schemes in the new tax year. The Chancellor said the changes would mean loss-making companies within the remit of the merged scheme will be taxed at a rate of 19%, down from 25%.
In addition to this simplification of the system, Hunt also outlined alterations to the enhanced relief offered to R&D-intensive companies.
To start with, more SMEs will qualify for enhanced relief due to the intensity threshold of the R&D intensives scheme being cut from 40% to 30%. This means that, for accounting periods commencing on or after 1 April 2024, companies can qualify for relief if 30% of their relevant expenditure is spent on R&D.
A new one-year grace period will allow businesses that failed to qualify for enhanced relief by missing the new 30% threshold to continue claiming the support. This measure will apply from 1 April 2024 and the company must have qualified for enhanced relief the year before in order to benefit.
» MORE: Small business grants
Image source: Getty Images
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