Autumn Statement 2023- What it means for small Businesses

Chancellor Jeremy Hunt has revealed the government’s tax and spending plans for the year ahead.

At 12.30pm on 22 November 2023, Hunt delivered his Autumn Statement in the House of Commons. This is likely to be the government’s last mini-budget ahead of a general election, which Prime Minister Rishi Sunak has indicated could be held in October next year.

The Office for Budget Responsibility (OBR) has also released their latest economic outlook for the UK today.

Last week’s news that inflation fell to 4.6 per cent in the year to October, down from 6.7 per cent for the previous month, encouraged some Conservative MPs to push for wider tax cuts ahead of today. And because of what’s been referred to as ‘fiscal headroom’, the chancellor has indeed announced some tax cuts in today’s statement.

But what has been revealed that could affect small businesses and the self-employed? Keep reading to find out

Key updates for small businesses

While the Spring Budget focused on childcare expansion, here’s a rundown of what the chancellor announced today:

1. National Insurance reform for the self-employed

The chancellor has ‘reformed and simplified’ taxes paid by the self-employed.

He’s abolished Class 2 National Insurance saving the average self-employed person £192 a year. Access to entitlements such as state pension and credits will be maintained in full.

Class 4 National Insurance has been cut to eight per cent for the self-employed earning profits between £12,570 and £50,270.

The current Class 4 rate is nine per cent for the self-employed earning profits between £12,570 and £50,270. It’s two per cent on profits for anything over this.

Hunt said, from April 2024 the cut to the initial rate by one percentage point will save the average self-employed person £350 a year.

2. Business rates frozen for small businesses

Business rates are set to rise with inflation from next spring, however today’s announcement saw the small business multiplier frozen for a further year.

The 75 per cent business rates relief for eligible retail, hospitality, and leisure businesses (up to £110,000 per business) has also been extended for 2024-25.

Hunt said these plans hope to “recognise the roles of pubs and high street shops in our communities”.

Image showing Living Wage, business rates, and National Insurance changes

Three key updates for small businesses. Image credit: Simply Business

3. Living wage increase

The government has already confirmed that the country’s national living wage will increase in April 2024.

Today Hunt confirmed it will increase to £11.44 an hour for workers over 23, and be extended to include 21 and 22 year olds for the first time.

Small businesses with employees will need to make sure they’re complying with the latest rates of pay for staff.

4. Late payment reforms

The government has promised to do more to crack down on companies paying SME invoices late.

The Cash Flow and Prompt Payment Review has already been published. And the Procurement Act means 30-day payment terms are extended to all subcontractor invoices within the supply chain for public sector contracts.

Additionally, any company bidding for large government contracts must demonstrate that they pay their own invoices within an average of 55 days. This will tighten to 40 days in April 2025 and 30 days in the years beyond that.

Read more: How to write a late payment letter – free template

Get small business guides and news straight to your inbox

Sign up

Your email address will be used by Simply Business so that we can send you the latest guides, offers and tips. You can unsubscribe from these emails at any time. For more information, check out the Simply Business privacy policy.

5. Business tax changes

A business tax break known as ‘full capital expensing’ has been made permanent.

This investment allowance reduces the corporation tax liabilities for businesses investing in the UK.

For every £1 that a business invests in IT, machinery and equipment, they can claim back 25p in corporation tax.

In practice, this means businesses can deduct costs of these items from their profits to reduce the corporation tax they need to pay.

This tax break has been in place since April 2023, following the Spring Budget, and was set to end in 2026. It’s now been made permanent, and Hunt said it’s “one of the most generous tax reliefs anywhere in the world.”

This comes as 31 per cent of SMEs cite high taxes as one of their key concerns for running their business in 2023, according to the latest Simply Business SME Insights Report.

Read more: What is corporation tax and when is it due?

Ahead of today’s announcement, UK manufacturers were pushing for reforms to the business tax and regulatory system, according to a report in the Guardian. The industry says it wants changes to improve competitiveness and encourage research and innovation.