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The Autumn Statement 2023 and what it means for small businesses

The Autumn Statement 2023 and what it means for small businesses...





When Jeremy Hunt announced his 2023 Autumn Statement there were a lot of headlines around tax cuts and wage rises. Sounds promising, but what does it actually mean for the small business owner?


Two main areas that directly impact on the small business owner is the cut in National Insurance and the increase in the National Living Wage (NLW). In April 2024, the National Living Wage will increase by just over £1 an hour to £11.44 per hour for workers over 23. For the first time, it will also be extended to include 21 and 22 year olds. For businesses employing staff affected by this rise, this will mean an increase of £1,962 a year for an average full-time employee working 37 hours a week. This could have a significant impact on the cashflow and profits of a small business. Cuts in National Insurance benefit the employees only - there is no fall in employer's National Insurance and so the NI cost for the employer will also rise in line with the increase in pay. However, the existing Employment Allowance may soak up some or all of the extra NI.



Another headline was the changes to National Insurance. There are two parts to this. The much hyped 2% cut in National Insurance only effects employees. While this is good news for them, as a small business owner and employer it will have no affect on your business. What may be of more interest is the 1% cut announced to class 4 NI and the change to class 2 NI, although if you run your business through a limited company, you will see no benefit from this. For a self-employed business owner, operating as a sole trader or in a partnership, the impact of the change in National Insurance is that you will pay 1% less NI on any profits you make between £12,570 and £50,270 each year. In real terms, if you are making profits at the upper end of this range, you will see your tax fall by around £377 a year as a result of this change. Also of interest will be the abolishment of Class 2 NI. Class 2 NI is the small bit of extra tax paid to ensure you keep entitlement to state pension and other contributory benefits - this will save £192 a year. However, if you earn below £6,725 you may still decide to pay Class 2 NI voluntarily to keep access to benefits and the state pension.



So the overall impact of those two changes on the small business is very much down to if you have employees and if you trade through a limited company. If you are a sole trader, you will see a saving on your annual tax bill of up to £569 but if you do employ staff then that saving could be outweighed by the additional wages costs you will face. For those working through a limited company, you will see no real change to your tax and may also face the increased wage costs.



Amongst the other announcements, those most likely to be of interest to the small business owner is the retention of the 'full expensing' relief and the freeze in business rates. However, many small businesses do not trade from premises and so the freeze in business rates will not be of benefit. As for the 'full expensing' relief, this has been around for a long time now in various guises and is not a new announcement. For the average small business owner, significant sums of capital expenditure can be infrequent and so this relief may not be of immediate benefit. The key impact on the small business owner is one of cash flow - it is usually many months after the asset has been acquired before the tax relief of the capital expenditure will be received.



In conclusion, potentially more costs for small businesses than savings. It seems that the support for working people via wage rises and NI cuts is being paid for by business, especially employers.

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