After months of political turmoil, Jeremy Hunt’s Autumn Statement marked an important milestone – both for the government, and the nation.
In contrast with the tax-cutting focus of Liz Truss’ mini-budget, the Sunak government increased taxes. There was also a revamp of cost-of-living payments.
But what about UK businesses?
In this post, we’ll talk you through the key announcements in the Autumn Statement, and the potential impact on your business.
Business Impact 1: Income Taxes
Changes to income taxes were some of the headline measures from the Autumn Statement. For one thing, the income tax personal allowance and higher rate thresholds were frozen until April 2028. In the nearer future, the threshold at which the top 45% additional rate of income tax is paid will decrease from £150,000 to £125,140 from 6 April 2023.
The latter announcement’s impact is clear: more people in the UK will enter the tax bracket, including those who are self-employed. Some calculations have put this figure as high as 250,000 more people becoming taxpayers.
Business Impact 2: Import Tariffs
On the other side of the coin were the announcements about import tariffs. The Chancellor announced that he would remove import tariffs on over 100 goods for a two year period. Including things like bicycle frames and ingredients purchased by food producers, this will be a welcome move for many in the manufacturing industry.
Business Impact 3: Business Rates
From 1 April 2023, business rates will change in response to changes in property values since the last revaluation of them in 2017.
To support this transition, the government announced a targeted support package. Some parts of this package include:
- Freezing business rates multipliers in 2023-24 at 49.9p and 51.2p. The government says this will lead to bills being 6% lower than without the freeze.
- Increased relief for retail, hospitality and leisure businesses worth almost £2.1 billion.
- Change to Transitional Relief means that businesses seeing lower bills as a result of the revaluation will benefit from that decrease sooner
- A more generous Supporting Small Businesses Scheme, protecting small businesses who lose eligibility for Small Business or Rural Rate Relief due to new property valuations.
Phil Vernon, head of ratings at professional services firm PwC, points out that despite the increased relief for retail, hospitality and leisure businesses, “larger retailers and other sectors will be facing full business rates bills”. This might mean that we see variations in how industries who get tax relief do, versus those who don’t.
Business Impact 4: Dividends
If you run a limited company, you might pay yourself using dividends. In the Autumn Statement, these allowances were cut; currently, it’s £2,000. In 2023-24, they’ll drop to £1,000, and finally to £500 in 2024-2025. Chris Campbell, head of tax (tax practice and owner-managed business taxes) at ICAS, says: “If the reduction in the dividend allowance means it cost[s] more to extract profits from a limited company, it could impact the decisions some businesses make on their structure. Some – say those that extract high levels of profit – may be better structured as an unincorporated business.”
Business Impact 5: Research & Development
In his statement to the House of Commons, Mr Hunt spoke of “concerning reports of abuse and fraud in R&D tax relief for SMEs.” To tackle this, he announced that for expenditure on or after 1 April 2023, the amount of relief will decrease from 130% to 86%. Additionally, the SME credit rate will decrease from 14.5% to 10%. While this may lead to smaller scale changes regarding R&D in companies, the Office for Budget Responsibility (OBR) has confirmed that it won’t have any negative impacts on the general level of R&D investment in the economy.
Business Impact 6: Minimum Wage
Both the national living wage and national minimum wage will increase for people aged over 23.
The national living wage is currently £9.50 for people over 23. This will rise to £10.42 from April 2023.
The rates for the minimum wage will change based on age:
- Rate for 21-22 year olds increase to £10.18 an hour (10.9% rise)
- Rate for 18-20 year olds increased to £7.49 an hour (9.7% rise)
- Rate for 16-17 year olds increased to £5.28 an hour (9.7% rise)
Those businesses employing apprentices will also see their rate of pay increase (to £5.28 an hour).
That increase represents an annual pay rise worth more than £1,600 to a full-time worker – but critics have argued that this will be cancelled out by increased inflation. Paddy Lillis, general secretary of the retail trade union USDAW said the chancellor had actually delivered a “real-terms minimum wage cut”.
Business Impact 7: Employment Allowance
Employment allowance is a scheme allowing eligible small businesses to legally reduce their annual National Insurance (NI) bill by up to £5,000, cutting one of the biggest sources of outgoings.
Employment allowance is a tax relief scheme in the UK that allows eligible small business owners with employees to apply to reduce their annual National Insurance bill by up to £5,000. As part of a government scheme to help support small businesses, those that qualify can apply for Employment Allowance to lower their outgoings.
This figure was initially £4,000 but had been raised. The Chancellor confirmed that he would freeze the allowance at this higher level, meaning 40% of all businesses won’t be affected by freezing the threshold for employer’s NIC.
Business Impact 8: Online Sales Tax
Prior to the Autumn Statement, the government were undertaking a consultation on bringing on an online sales tax or OST. This would have brought the business rates paid by online stores in line with those of physical stores – however, the government has decided against it.
The official Autumn Statement document references “concerns raised about…the risk of creating unintended distortion or unfair outcomes between different business models.” Higher prices for consumers also played a role in the tax being scrapped.
If you want to dive deeper into the Autumn Statement and its measures for business, you can read the government’s full document here.
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