In a bid to woo voters in the General Election next year, Chancellor Jeremy Hunt made several announcements in his recent Autumn Statement, relating to tax and spending that will help British businesses and grow the economy. Here we look at the main factors that will affect small businesses in the UK.
Cuts to National Insurance
A key point from the Autumn Statement 2023 is that there will be significant changes to National Insurance which, it is estimated, will help 27 million employed people and around 2 million self-employed.
From 6th January 2024, the main rate of Employee National Insurance will be cut from 12% to 10% on earnings between £12,571 and £50,2571.
Additionally, the Class 2 National Insurance contributions will be scrapped from April 2024, helping self-employed people. Anyone earning over £12,570 currently must make a weekly contribution of £3.45, but this will be abolished in April. Anyone earning under the threshold will not have to make any National Insurance contributions, but will still have access to contributory benefits.
Finally, the main rate of self-employed National Insurance contributions, known as Class 4, will be cut from 9% to 8% from 6th April 2024. If you’re self-employed, and make profits between £12,570 and £50,270, you will pay the new rate of 8% per year. Any profits over £50,270 will incur an additional 2%.
National Living Wage set to rise
In another boost to help the average employed worker, the Autumn Statement announced an increase to the National Living Wage in April 2024. Hunt confirmed that the increase will apply to over 21s, taking the minimum earnings from £10.42 to £11.04 per hour.
Small businesses must ensure they comply with these new rates of pay for staff.
Business rates relief extended
In his Autumn Statement, Jeremy Hunt announced that he will freeze the small business multiplier for a fourth consecutive year.
The 75% business rates discount for retail, hospitality and leisure businesses is also extended for another year which amounts to savings worth £4.3 billion. According to Hunt, this business rate discount will save the average independent pub over £12,800 in the coming year.
Bid to tackle late payments
The Chancellor confirmed in the Autumn Statement 2023 a plan to help tackle late payment problems which many businesses experience.
From April 2024, any businesses bidding for government contracts worth more than £5 million will have to show that they pay their purchase invoices within an average of 55 days. This will be moved to 45 days in April 2025, and then to 30 days in the following year.
Cash basis accounting change
Following a consultation earlier this year, the Autumn Statement confirmed that there will be changes to cash basis accounting.
Cash basis accounting allows businesses to record their income and costs on the date that the money comes in or is paid out, rather than the date displayed on the invoice or bill, which is known as accrual accounting.
From 6th January 2024, the government has approved changes so that cash basis accounting will be set as the default, with an option to opt out for accruals. The turnover threshold in which businesses can use cash accounting will be scrapped, as will the current £500 limit on interest deductions.
Full capital expensing relief made permanent
In his Autumn 2023 Statement, the Chancellor announced that the full expensing tax break, first announced in the Spring Budget, will be made permanent.
Qualifying companies can reduce the amount of Corporation Tax they pay by up to 25p for every £1 they spend on IT, plant and machinery.
According to Hunt, this will increase annual investment by about £3 billion a year, and he claimed it was “one of the most generous tax reliefs anywhere in the world.”
How will the Autumn Statement 2023 affect your business?
The measures from the Autumn Statement are intended to boost the economy and help businesses. Whilst some come into play in January 2024, most are not due to take effect until April 2024, so it makes sense to understand now which points are likely to affect your business and what you need to do to plan ahead.
If you’d like any advice or help with understanding more about cash accounting or queries relating to tax, please get in touch with the team at Office Assistants.
