Autumn Statement 2023: Understanding the Implications for Your Business

Today, we turn our attention to the Autumn Statement delivered by the Chancellor of the Exchequer, Jeremy Hunt. But what does this mean for businesses? Let's take a closer look.

In what he describes as a 'huge boost for British competitiveness,' the Chancellor has outlined a series of significant measures expected to have an overall impact of £20bn per annum within the decade – a record-breaking stimulus for business investment.

Central to his announcement are several changes to national insurance, including the complete abolition of class two national insurance and reductions in other classes, expected to result in considerable savings for self-employed individuals. The Chancellor also announced substantial investments into innovation centers aimed at establishing the UK as an 'AI powerhouse', increased funding for engineering apprenticeships, and a notable rise in the National Living Wage.

These measures have been warmly received by the Federation of Small Businesses, with Policy Chair Tina McKenzie expressing gratitude for the Chancellor's pro-small business stance and his efforts to address the concerns of small businesses.

Read more below as we unpack these developments and explore what they could mean for the future of small businesses.

Business Taxes

Capital Allowances – Permanent Full Expensing

The government has also made permanent the two new temporary first-year allowances introduced in the Spring Budget 2023. Companies can now claim a 100% first-year allowance for main rate expenditure and a 50% first-year allowance for special rate expenditure without worrying about an expiry date. This move encourages investment in plant and machinery, which could be crucial for your business growth.

Tax Reliefs

The government announced several measures on tax reliefs, including enhanced support for Research and Development (R&D) intensive small and medium-sized enterprises, an extension to the 'sunset date' for freeport tax reliefs, and administrative changes to the creative industry tax reliefs.

VAT Threshold

The Government announced the VAT registration and deregistration thresholds will be frozen at £85,000 and £83,000, respectively, until April 2026.

This gives businesses certainty over when they will need to register for VAT for the next three years but will inevitably mean that more smaller businesses will have to register as inflation pushes up turnover. This will be of concern to small businesses that supply directly to consumers and can’t add the VAT on top of the prices they charge. Therefore, registering for VAT represents an absolute cost to the business.

Employment Taxes

National Minimum Wage and National Living Wage

From 1‌‌‌ April‌‌‌ 2024, the National Living Wage will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over. Young people and apprentices on the National Minimum Wage will also see a boost to their wages, which will increase to £6.40 an hour.

As a business owner, you'll need to adjust your payroll systems accordingly. We understand changes like these can be challenging, but remember, paying your employees a fair wage is not just the right thing to do; it's also good for business. A well-paid workforce is often a motivated and productive workforce.

Extending NICs Relief for Hiring Veterans

Are you considering hiring veterans? The government has extended the NICs relief for employers who hire former members of the UK regular armed forces until April 2025. This relief applies to the secondary Class 1 NICs due on the wages of veterans for the first 12 months of their civilian employment.

Off-Payroll Working (IR35) – Calculation of PAYE Liability in Cases of Non-Compliance

The government will legislate in Finance Bill 2023 to enable organisations to reduce their additional PAYE liability under the off-payroll working rules. This will account for Income Tax and Corporation Tax already paid by a worker and their intermediary where a client organisation has been found to be non-compliant with the rules.

These changes will take effect from 6‌‌‌ April‌‌‌ 2024. A summary of responses to the consultation launched in April 2023 has also been published.

Personal Taxes

National Insurance Contributions

One of the most significant announcements is the reduction in National Insurance contributions (NICs) rates. From January 2024, the main rate of Class 1 employee NICs will be cut from 12% to 10%, and the main rate of Class 4 self-employed NICs will be reduced from 9% to 8%. Moreover, from April 2024, no one will be required to pay Class 2 self-employed NICs.

So, what does this mean for self-employed individuals? Those with profits exceeding £12,570 will no longer need to pay Class 2 NICs but will still have access to contributory benefits like the State Pension. Individuals with profits between £6,725 and £12,570 will continue to receive access to these benefits without paying NICs, as they currently do. Those with profits below £6,725 can voluntarily pay Class 2 NICs to receive these benefits.

As a business owner, you'll need to adjust your payroll systems accordingly. We know changes like these can be daunting, but don't worry - further guidance on these changes will be published soon.

Making Tax Digital for Income Tax Self Assessment (ITSA)

Are you familiar with Making Tax Digital (MTD) for ITSA? If not, it's time to get acquainted. MTD for ITSA represents a significant shift in the way taxpayers report their income to HMRC. As announced in the Autumn Statement 2023, the government will make design changes to this system, simplifying and improving it for taxpayers and their representatives.

The requirement to provide an End of Period Statement will be removed, and some taxpayers, including those without a National Insurance number, will be exempted from MTD. Moreover, taxpayers using MTD will be able to be represented by more than one tax agent.

These changes are designed to make the tax process easier and more accurate. And while these changes may seem daunting, remember, change often brings opportunities. Draft regulations on these changes will be published for technical consultation later in 2023.

In conclusion, this Autumn Statement brings a wave of changes designed to stimulate economic growth and ease the tax burden on businesses. But remember, understanding these changes is just the first step. The next step? Taking action. Whether it's adjusting your payroll systems or exploring new hiring opportunities, it's time to leverage these changes for the benefit of your business.

Stay tuned to our blog for further guidance on these changes. Together, let's navigate the path to business success.