What the Autumn statement means for small businesses

As you were?

Firstly some of what was in the Autumn Statement took us back to where we were before the summer.  Corporation tax rises that had been cancelled in the ‘mini budget’ at the end of September are now going ahead.  A small profits relief will avoid the impact on very small businesses, but it means that businesses with a profit over £50,000 will pay more tax on their profits in future financial years.

National Insurance thresholds will be frozen for the coming years – while this affects individual finances too, for businesses it’s worth noting that freezing the threshold at which employers pay National Insurance will add to the cost of employment.

National ‘living wage’ or the minimum wage is going up to £10.42 for over 23s from April, which means that this will now be the law.  If you pay more than this already it won’t directly affect you.  However, you may want to consider whether you need to maintain the differential pay you offer, especially in the current context of a skills shortage.

A return to austerity is on the cards as the key purpose of this statement was to bring back some level of economic stability after the turbulence of the last few months.  If you work with public sector clients this could particularly affect you.

What wasn’t in the Autumn statement

‘As the budget will be taking place in February some of the decisions on tax and spend for next financial year haven’t taken place yet and there is still space for some of these decisions.  Some of the things that weren’t in the Autumn statement to look out for are:

  • There was no extension of the ‘super deduction’ – a tax break that rewards businesses for investing in capital equipment.  It’s worth looking out for this in the budget in February, otherwise the incentive to invest in this financial year will be greater than next.  With a desire to boost growth this could be something the Chancellor considers in the budget.
  • Approved Mileage rates, the rate of 45p a mile as approved milage rate has been in place for a number of years now and with inflation generally and the cost of motoring in particular rising this is something some people thought might be due for review.
  • Reform of business rates isn’t happening, although revaluations have taken place.  This is a tax that particularly affects the high street and hospitality while internet based businesses generally pay lower rats, so it’s an area that the government may wish to look at again.
  • Confirmation of National Insurance rates in 2022/2023: we can presume that this will be confirmed in the budget (due February)
  • No reform of ‘non dom’ status a tax loophole that enables a few indivdiuals born abroad or whose fathers were born abroad to choose whether to pay tax on their earnings in the UK.

Impact of the Autumn Statement on individuals

For many people the biggest impact of the autumn statement on their pay packet will be the freezing of income tax rates and personal allowances until 2028 .  This means that if your wages rise either due to a promotion/progression or just because of inflation you’ll be more quickly into a higher rate of tax.

For those at the top end of the income level the threshold for the top 45p rate of Income tax will be reduced from £150,000 to £125,140.

For business owners and others it’s worth noting that the level of dividends you can receive without paying tax will reduce from £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25

What next?

Perhaps the key point from the Autumn statement is that we are projected to be entering a period of recession. Small businesses will need to plan ahead to secure their future. However, it’s worth remembering that even in the worst recession many businesses can still grow and thrive. There’s a skills shortage in the UK, and small businesses are well placed to provide skills and services to help bridge that gap.

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