Just over a year on from Liz Truss and her “less than the lifespan of a lettuce” premiership, Chancellor of the Exchequer Jeremy Hunt announced his second Autumn Statement.
The statement is somewhat of a mixed bag, with the much-touted ‘tax cuts’ mainly limited to National Insurance, and other minor tweaks not applicable to many smaller businesses.
So, we’ve taken each announcement and give you the positives (highlights) and the drawbacks (lowlights).
Highlights for Small Businesses
Here’s the good news.
National Insurance rate cut for the self-employed
Self-employed people are receiving a National Insurance cut, reducing the rate from 9% to 8% (and some loose £) from 6th April 2024. This will help the self-employed keep a little more of their hard-earned cash, as the Chancellor also abolished Class 2 National Insurance from April 2024. Self-employed currently pay weekly Class 2 NICs of £3.45 if they are earning more than £12,570.
Limited company owners
Sorry, no early Christmas present from Jeremy for you. However, we should perhaps be relieved that business rates aren’t getting any worse, and that the 75% business rates discount for retail, hospitality and leisure firms has been extended for another year,
Progress on the late payments issue
The Chancellor announced that businesses bidding on government contracts worth over £5 million will have to show good payment practices based on number of days.
Lowlights for Small Businesses
Now for the not-so-good announcements:
A (roughly) 10% rise in the National Living Wage
This will be a major headache for team bandings during a time of wage pressure.
No announced cut to employer National Insurance contributions
While the main employee rate of National Insurance has been cut from 12% to 10%, there’s no reduction in the rate their employers are paying.
Making Tax Digital for Income Tax
It’s had delays and setbacks galore, but Making Tax Digital for landlords and the self-employed still looks set to start on 6 April 2026. According to the Gov website, you will be affected if you have “an annual business or property income of more than £50,000.”
No change to the main corporation tax rates.
No change there then.
Uncertain tax landscape for Research & Development tax credits
It is a shame that this is still such a grey area, considering the economic importance of this sector.
Potential extra admin around workplace pensions
This is reform dependant, but employers may have to contribute to multiple different ‘pots’ for their employees. Because we all crave extra admin, don’t we…
The stuff about ‘full expensing’ being worth billions is not something most small businesses care about. If you are spending over £1 million on kit you might, but that’s about it. Full expensing was first introduced in the Spring 2023 budget and has now been made permanent.
Highlights for everyone else
Minimum wage increase
Those on minimum wage get a (roughly) 10% increase from 1st April 2024 (£11.44 over 21). This is genuine Good News for those on low pay, despite the challenges it represents for small businesses.
A 2% cut in National Insurance for those in employment
The size of this cut did surprise us somewhat; however, the NI thresholds are currently frozen whilst wages are rising. So, more people are heading north into the higher tax band. The Chancellor said that he would bring in legislation to implement this change from 6th January 2024.
State Pension is up by 8.5%
Good news for all those wishing to retire, but we suspect many would-be retirees will still want to transition by working part time for a while if they can.
Lowlights for everyone else
No change to tax thresholds
This is a Big One, as more workers have received pay increases over the past year. This looks great to employees but as a result, like many others, this now means they may pay the higher rate tax too.
No changes to the loss of Child Benefit over £50,000 p.a
This is a massive disappointment, as this is causing crazy high ‘tax’ on £50,000 – £60,000 earnings. You could do much better on this one, Chancellor.
Random points of interest
TV tax credits
If you are in the TV industry, there is talk of extending the tax credit system. One for producers rather than performers.
More HMRC funding
The Chancellor has allocated £163 million to allow HMRC to better collect debt. As the Chancellor said: “I will … provide HMRC with the resources they need to ensure everyone pays the tax they owe, raising an additional £5 billion across the forecast period.”
This may mean the HMRC will be scrutinizing tax returns more in the future, which is a very good reason to make sure they are correct. If you need help with your business tax returns, we are happy to help, of course.
Training for the self-employed
The HMRC are to rewrite the guidance around what a self-employed/sole trader can deduct in terms of training. This has been a difficult area in the past, and the deductions are not very generous either.
A “Simpler Tax System”
Having a “Simpler Tax System” remains ‘an ongoing propriety for the government’. As part of this goal, they have (effectively) said that in 2024-25 if you are in a PAYE (employed) role with earnings over £150,000 you won’t have to do a self-assessment tax return by default.
The devil is in the detail
If you missed Mr Hunt’s speech live, and/or get tired to the background ‘Hrumphs’ and general mutterings by MPs behaving like kids at a party where the cupcakes have run out, you can read the transcript here instead.
Anything we’ve missed that you’re worried about?
Ask your accountant – they should be happy to help. If you don’t have an accountant, or feel you aren’t making the most of allowances and tax breaks with your current accountant, we’d love a chat about how we can help.