Understanding the impact of the Autumn Statement

So this week we saw the Government's much vaunted Autumn Statement delivered. We’d been drip fed all sorts in the weeks leading up, mostly about inheritance tax cuts and changes to Stamp Duty. Amazingly, neither featured in the final cut.?

There was a mood from those in the know that any rabbits out of the hats would be held back for the Spring Budget which would be nearer to a General Election. Well, a week’s a long time in politics as the adage goes, and obviously things changed.?

So see the below for a detailed breakdown of what we actually got from Mr Hunt on Wednesday, and the key points that demand your attention:?

1. National Insurance Contributions (NICs):

Effective from 6 January 2024, a reduction of 2p in NICs for employees, decreasing from 12% to 10%, is in the offing. Simultaneously, Class IV NICs for the self-employed will experience a decrease from 9% to 8% starting April 6, 2024. Additionally, Class II NICs for the self-employed will be phased out, also commencing April 6, 2024. ??

2. Business Rates stability in England:

For businesses in England, a welcome respite. The small business multiplier for business rates will remain frozen for the upcoming year, sparing rate payers from the scheduled CPI inflation increase. Furthermore, the 75% discount on business rates for retail, leisure, and hospitality SMEs in England has been extended until March 2025, a victory achieved through effective collaboration between the FSB and the Government in Westminster.?

3. Combatting late payments:

Commencing April of the next year, companies with a turnover exceeding ￡5 million will face restrictions on bidding for public contracts if they exhibit a history of paying suppliers after 55 days or more. The subsequent years will witness a gradual reduction in the allowable payment periods, aligned with the Prompt Payment Code. This nationwide initiative, born out of extensive FSB campaigning, will be further championed in the ongoing efforts to build upon these foundations.?

4. Clarity in tax matters:

The HMRC will undertake a comprehensive rewrite of guidance concerning the tax deductibility of training costs for sole traders and the self-employed. This initiative aims to offer enhanced clarity on deductible costs, ensuring that businesses can confidently consider updating skills and staying abreast of technological advancements as allowable expenses for tax purposes.?

5. Enhanced Income Tax Cash Basis:

From 6 April 2024, the income tax cash basis for the self-employed and partnerships will undergo expansion and simplification. The ￡150,000 turnover threshold will be removed, providing the option to choose the accruals basis, should it be preferred.?

6. Technological Transformation:

The Making Tax Digital for Income Tax Self-Assessment threshold will remain at ￡30,000, with significant improvements and simplifications set to be implemented from April 2026.?

7. Alcohol Duty Freeze:

A notable development for those in the hospitality sector – alcohol duty has been frozen until 1 August 2024.?

8. R&D Tax Relief Overhaul:

The two existing R&D tax relief schemes will merge, ushering in a new scheme for R&D-intensive firms from April 2024. To qualify for the R&D intensive scheme, small businesses must allocate 30% of their total expenditure to R&D, down from the previous threshold of 40%.?

9. Employment Incentives:

The Employers National Insurance holiday, a product of FSB's collaboration with X-Forces Enterprise benefiting small employers hiring veterans, is extended for another year.?

10. Capital Allowances Assurance:

Full expensing, providing 100% capital allowances on qualifying new plant and machinery investments, becomes a permanent fixture from March 2026. However, it's worth noting that most small businesses are already covered by the Annual Investment Allowance set at ￡1 million.?

11. Regional Investment Zones:

Exciting news for us here in Greater Manchester with (as well as the West Midlands, the East Midlands, Wrexham and Flintshire) new Investment Zones announced. Financial incentives for Investment Zones and tax reliefs for Freeports have been extended from five to ten years.?

12. Regulatory Responsibilities:

A significant extension of the Growth Duty to Ofcom, Ofgem, and Ofwat implies these crucial regulators must consider economic growth and exercise regulatory action judiciously and proportionately, particularly concerning SMEs.?

13. Apprenticeships Initiative:

￡50 million has been allocated to a two-year apprenticeships pilot in England. The focus is on encouraging starts in growth sectors and addressing barriers to entry in high-value apprenticeships.?

14. Open Banking Encouragement:

Anticipate forthcoming legislation in the next year designed to stimulate the uptake of Open Banking-enabled payments.?

15. National Living Wage Adjustments:

Now here’s a tough one for some businesses who are struggling. Come 1 April 2024, the National Living Wage (NLW) will witness a 9.8% increase to ￡11.44. That's some burden being thrust on the both the public and private sectors. Perhaps more importantly, the age threshold for this is being lowered from 23 to 21 years old which is going to mean significantly bigger wage bills especially in struggling sectors such as retail and hospitality. Some will see this as the Chancellot giving with one hand and taking with the other if we look at the business rates concessions. FSB will advocate for additional measures in the Spring Budget to enhance affordability around this.

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So in summary, the Autumn Statement ushered in a series of changes with profound implications for small businesses and the self-employed. As you navigate these developments, rest assured FSB remains dedicated to advocating for your interests and facilitating a business environment conducive to growth and prosperity. Stay informed, stay resilient, and may your enterprises continue to thrive!