What the 2023 Autumn Statement means for small businesses

On Wednesday 22 November, Chancellor Jeremy Hunt gave a speech to the House of Commons unveiling the 2023 Autumn Statement.

The Chancellor is the government's chief financial minister, and the autumn statement is their opportunity to set out plans for the UK economy.

On the same day, the Office for Budget Responsibility (OBR) publishes its economic and fiscal outlook. As the independent public finances forecaster, this is their independent assessment of the expected impact of the policies announced in the statement.

Delivered against the backdrop of an ongoing cost-of-living crisis, high interest rates and inflation double that of the Bank of England’s target rate, the statement focussed heavily on growth, with plenty for businesses to take note of.

The plan promises to "back British business with 110 growth measures" which included tax reductions, wage increases and investments into business worth an estimated £20 billion a year. But how do these plans affect small businesses, the self-employed and landlords? Read on to find out:

Skip ahead:

• National Insurance tax cut
• Minimum wage increased
• Full expensing made permanent
• Business rates relief extended
• Business investment and Investment Zones
• Simplified research and development tax relief
• A crackdown on late payments
• Permitted development consultation

National Insurance tax cut

Perhaps the most eye-catching announcement involved National Insurance, a tax paid by employees and the self-employed to fund and build entitlement to benefits such as the State Pension and Maternity Allowance.

For employees, the rate is set to be cut from 12% to 10%, effective from 6 January 2024. This is expected to impact 27 million people, with someone on an average salary of £35,000 pocketing an extra £450 a year as a result of the change.

And the changes to National Insurance didn’t stop at employees. Support was also announced for the self-employed. This came in the form of the abolishment of Class 2 National Insurance Contributions, expected to impact two million people and save the average self-employed person £192 a year.

Class 4 National Insurance, charged on self-employed earnings between £12,570 and £50,270, will also be cut by 1% to 8% from April.

Impacted: employees and the self-employed.

Changes to national minimum wage

The minimum amount that can be paid to workers who are 21 and over, known as the National Living Wage, will see a 9.8% increase from April 2024. In real terms, this is estimated to be worth up to £1,800 a year for a full-time worker.

Changes to the national minimum wage, paid to workers under the age of 21, will also be made.

For employees, this will bring the rates to:

Impacted: employees, and employers paying National Living Wage.

Full expensing made permanent

Full expensing enables businesses to deduct the entire cost of qualifying assets in the year of purchase, rather than spreading the deduction over multiple years, providing valuable tax relief.

Having been previously capped at three years, full expensing will now be made permanent.

Dubbed the “largest business tax cut in modern British history” by the Government, and the “single most transformational” change to boost business investment and growth by The CBI, Make UK, Energy UK and 200 other business leaders from companies including BT Openreach, Siemens and Bosch.

This means that for every million pounds a company invests, they get £250,000 off their tax bill in the very same year. It is expected to increase annual investment by £3 billion a year.

Impacted: incorporated businesses.

Business rates relief

Business rates are a tax on property that’s used for business, such as offices, shops and warehouses.

The standard multiplier, which applies to high-value properties, will now rise in line with inflation. However, the small business multiplier – which applies to properties with a value of less than £50,999 – will again be frozen for a further year.

In addition for the retail, hospitality and leisure sectors the 75% discount on business rates up to £110,000 – which was increased from 50% a year ago – will be extended for another year.

This will come as good news to many of the businesses that operate out of the roughly 2.1 million properties in the UK that are liable for business rates.

Impacted: businesses that own premises.

Business investment and Investment Zones

Setting out plans to support the UK’s most innovative industries, the Chancellor unveiled a raft of investments, including:

• £500 million invested over the next two years to fund AI innovation centres, with a focus on supporting access to computing power
• £960 million to the Green Industries Growth Accelerator to support offshore wind and electric networks, nuclear, carbon capture, utilisation and storage, and hydrogen technologies

• £4.5 billion to attract investment in strategic manufacturing sectors. This includes:

  • £2 billion for zero emission investments in the automotive sector
  • £975m for aerospace
  • £520m for life sciences.

In addition to investing in specific industries, the Chancellor also expanded support for Investment Zones. Providing low-tax and low-regulation for business, Investment Zones are intended to drive growth in the chosen areas and create “knowledge intensive clusters”.

In the announcement, financial incentives for Investment Zones were extended from five to ten years.

In addition to West Yorkshire, announced earlier in the week, three further Investment Zones were also announced in England – West Midlands, East Midlands and Greater Manchester – creating an estimated 65,000 new jobs. A second Investment Zone was also announced for Wales, in Wrexham and Flintshire.

Impacted: large businesses, SMEs and emerging technology.

Simplified research and development tax relief

The Research and Development (R&D) tax relief scheme offers support for companies that work on innovative projects in science and technology.

In a bid to cut complexity and encourage more businesses to claim, this will be merged with the Research and Development Expenditure Credit (RDEC).

The threshold to qualify for this relief will also be lowered, allowing as many as 5,000 more startups to benefit from this relief as they grow their businesses.

Impacted: tech startups and scaleups.

A crackdown on late payments

The culture of late payments for businesses was also addressed by the Chancellor.

Outlined as a significant challenge for small businesses, the Chancellor announced plans to introduce a condition that any company bidding for large government contracts should demonstrate that they pay their own invoices within an average of 55 days.

This will be introduced from April 2024, affecting both companies bidding for large government contracts as well as the many smaller businesses and sub-contracting companies they rely on to deliver these contracts.

Impacted: SMEs and subcontractors.

Permitted development rights

A small pledge that may have caught the eye of landlords is the Chancellor’s commitment to consult on a new Permitted Development Right, intended to allow any house to be converted into two flats provided the exterior remains unaffected.

Impacted: landlords.

Source: GOV.UK