2022 Autumn Statement and How it Impacts Businesses
November 25, 2022 11:44 am
In the latest Autumn Statement, the Chancellor, Jeremy Hunt, announced £24bn of tax rises alongside £30bn of public spending cuts over the next five years to help address the UK’s fiscal deficit.
The Statement included several announcements impacting businesses, although the majority were largely changes to rates and thresholds rather than any significant new measures.
Acknowledging that the UK is now in recession the Chancellor also indicated that things may get worse before they improve. This will be bad news for many businesses that are already finding it difficult coming back from COVID pandemic and struggling with increased energy, wage and other costs.
Our latest blog reviews the key highlights and some of the challenges that businesses will face over the next year and beyond:
Business Rates
The Chancellor announced a targeted support package worth £13.6 billion over five years and indicated that the planned revaluation of business rates would go ahead next year. This means that from 1 April 2023, business rate bills will be updated to reflect changes in property values since the last revaluation in 2017.
The extended support package sees business rate relief for eligible retail, hospitality, and leisure businesses being increased from 50% to 75% up to a maximum of £110,000 per business in 2023-24.
More information about the business rate changes can be found on the government’s Business Rates Factsheet.
Income Tax Thresholds
The thresholds for each of the income tax brackets will remain frozen for the next 2 years increasing the amount of tax payable by everyone liable to pay income tax including the self employed.
It was also announced that the additional income tax threshold will be reduced from £150,000 to £125,140. This is a significant change that will see more self-employed people becoming additional rate taxpayers, paying 45% on earnings above £125,140.
National Insurance
Freezing National Insurance thresholds for businesses will take effect from April 2023. Companies have to pay 13.8% in National Insurance contributions on earnings of all workers over £9,100 per year. The Government has frozen this threshold until April 2028, meaning companies paying more over the coming years for each person they employ.
Increases to National Living Wage and National Minimum Wage
An increase to both the National Living wage (NLW) and National Minimum Wage (NMW) were also announced, with the NLW increasing to £10.42 per hr for those over age 23 – an increase of £1,600 per annum for a full-time employee.
The NLW also saw average increases around 9%, the new rates from April 2023 are:
- £10.18 per hr for those aged 21 – 22
- £7.49 per hr for 18 – 20 year olds
- £5.28 per hour for those 16-17
- Apprenticeship rate also increases to £5.28
Company Dividends
The majority of owner managed businesses pay themselves primarily through dividends rather than a salary as a more tax efficient form of remuneration. Reductions to the annual allowance that can be taken without paying tax were announced, with a cut to the tax-free dividend allowance from £2,000 to £1,000 next year and then to £500 from April 2024.
Capital Gains Tax
Capital Gains Tax (CGT) is payable by businesses on the sale of assets such as land and machinery. The Annual Exempt Amount for Capital Gains Tax will be cut from £12,300 to £6,000 from April 2023 and £3,000 from April 2024 increasing the tax liability for businesses (and individuals) significantly.
Energy Bill Relief Scheme
There was no mention within the statement of what will happen to the Energy Bill Relief Scheme for businesses post April 2023. The expectation is that from April 2023 there will be targeted support for the most vulnerable businesses such as hospitality, leisure and manufacturing that use high levels of energy.
R&D Tax Credits
The R&D tax credit scheme is designed to incentivise small and medium-sized businesses to innovate. The Chancellor announced cuts to the R&D tax credit for SMEs which will decrease from 130% to 86% from April 2023. Going forward, the R&D tax credit will be worth only 18.6p for every pound of R&D spend compared with the current 33.3p.
At the same time, plans to increase the rate of Research & Development Expenditure Credit from 13% to 20% is likely to benefit predominantly larger businesses.
Investment Zones Scrapped
The mini-Budget in Sept set out that the UK would be establishing 200 investment zones with holidays on business rates and employers’ National Insurance contributions for new workers earning less than £50,000 a year.
The investment zones would have cost Government £12bn a year in lost tax revenue and as such the Chancellor has now scrapped this initiative and “will now focus on leveraging our research strengths, to help build clusters for our new growth industries.”
The Chancellor also indicated that those sectors which have the most potential for growth – such as digital, green technology and life sciences – will be supported through measures to reduce unnecessary regulation and boost innovation and growth. The Autumn Statement also announces the final Solvency II reforms, which will unlock tens of billions of pounds of investment across a range of sectors.
What will be the impact on my business?
If you need help to understand how changes will impact your business and want support to plan for them, please get in touch.
At FCF we provide cost effective, professional accountancy advice to small businesses across a range of sectors.
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Categorised in: Budgets, Business
This post was written by Steph Roffey
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