Autumn Statement: Key updates for small businesses
The Chancellor of the Exchequer, Jeremy Hunt, delivered his Autumn Statement on 22 November 2023 laying out 110 planned growth measures to boost business and reward work.
1. National Insurance Contributions cut for workers and self-employed
The chancellor has ’reformed and simplified’ taxes paid by the self-employed and workers.
For the self employed, he has abolished Class 2 National Insurance saving the average self-employed person £192 a year. Access to entitlements such as state pension and credits will be maintained in full.
Class 4 National Insurance has been cut from 9% to 8% for the self-employed earning profits between £12,570 and £50,270. Hunt said, from April 2024 theses cut will save the average self-employed person £350 a year.
For workers, Class 4 National Insurance Contributions will drop from 12% to 10% from April 2024.
Our thoughts
The personal allowance threshold - or the income we earn annually tax free - has been sent since April 2021 at £12,570 and is set to remain the same until 2027.
According to the New Economics Foundation, the freezing of tax-free allowances since 2021 will result in the the government raising an extra £26bn in tax revenues in 2024/25 and the actual tax payout will rise fice times higher for lower earners compared to high earners in the three years time.
“The cutting of national insurance contributions equates to a marginally smaller tax rise from April 2024 than already planned”
2. Living wage increase
The government has already confirmed before this statement that the national living wage will increase to £11.44 an hour for workers over 23, and this will be extended to include 21 and 22-year-olds for the first time.
Our thoughts
If you hire staff in your small business, you will need to make sure you are complying with the latest rate of pay.
This will obviously be a further squeeze for business owners and their monthly payroll taxes could increase.
3. Full expensing for limited company business
Currently, there are two temporary tax reliefs for making capital expenditures from 1st April 2023 but before 1st April 2026:
100% tax relief for qualifying expenditure on plant or machinery, tractors, lorries, furniture, technology and more in the year of purchase versus spreading the cost across multiple tax years– known as full-expensing
50% tax relief for qualifying expenditure on special rate plant or machinery
Full expensing replace the Super Deduction allowance previously, that
The Chancellor has said these allowances will now be made permanent.
“Small Business already get tax relief on capital expenditure from using other tax reliefs. This permanent change will be welcome to medium and large businesses only”
4. Changes to the Research and development (R&D) tax credits
The government is merging the existing two R&D tax relief schemes available - one tailored to SMEs and the other larger to businesses. This change will take place from April 2024 despite calls for a delay from industry experts and businesses.
The government already announced earlier this year at the Spring Budget 2023 that the R&D relief would be cut under the SME scheme and that you are required to have at least 40% qualifiying expenditure to be eligible.
The new rules from April 2024 means that this will drop to 30%. However, this still leaves around 25,000 UK companies that will benefit from the scheme going forward.
Our thoughts
“It will be much harder for SMEs to qualify for R&D tax reliefs going forward. Seeking expert help is essential.”
Other indirect tax updates
The 0% rate of VAT on women's period products will be expanded to include period underwear.
Alcohol duty will be frozen until 1 August 2024 but tobacco duty on hand-rolled tobacco will increase above inflation.
The rate of plastic packaging tax will be increased in line with the Consumer Price Index (CPI) from 1 April 2024.
Air passenger duty (APD) rates will be increased in line with the Retail Price Index (RPI) with effect from 1 April 2024.
Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs): The government will introduce legislation in Autumn Finance Bill 2023 to extend the existing sunset clauses for the EIS and VCT schemes from 6 April 2025 to 6 April 2035
