What does the Autumn Statement mean for small businesses?
Posted on 16th December 2022
Following September’s mini budget, the Chancellor’s Autumn Statement in November redefined the government’s priorities as stability, growth and public services. This will be funded by £24billion in increased taxes and £30billion worth of cuts in public spending.
Your personal taxes
Rather than removing the 45% additional rate of tax as proposed in September, it will now remain and affect an estimated 250,000 more people as the threshold changes from annual earnings of £150,000 to just over £125,000. Other allowances and thresholds for income tax, National Insurance and inheritance tax will remain the same until April 2028; two more years than previously planned.
Business rates
If you have business premises you will see increases in your business rates in 2023 in line with the revaluation of business properties. However, there will be transitional relief for five years and the planned overall 10% increase won’t go ahead.
There’s better news for retailers, leisure and hospitality businesses next year with the 50% discount in business rates going up to 75%, with a maximum of £110,000 per business.
VAT
The turnover threshold at which businesses have to register for VAT will stay at £85,000 until 2026. However, with costs and prices increasing rapidly this means many businesses will reach this threshold sooner than expected.
Capital Gains Tax
The level of annual tax exemption for any assets you might sell at a profit will be reduced from £12,300 to £6,000 next year and will be cut again in April 2024 to just £3,000. This means that many more people will need to pay Capital Gains Tax (CGT), including small business owners who sell their companies. If you’re considering selling your company in the next few years it might seem sensible to sell sooner rather than later, but buyers will be aware of these changes to CGT and are likely to drive a hard bargain.
Dividends
If, like many business owners, you pay yourself a tax-efficient monthly salary and draw dividends from your company’s profits you will be affected by the reduction in the tax-free dividend allowance. This will reduce from the current £2,000 to £1,000 next year and to £500 in April 2024.
You will already have paid Corporation Tax on your company’s profits which will also be increasing from next year on a sliding scale from 19% to 25%, so this is effectively a double tax burden.
National Insurance
National Insurance contributions (NIC) for businesses from April 2023 will be 13.8% on employee earnings over £9,100 per year and this threshold will remain until 2027/28. As inflation increases and salaries go up employers are likely to find they are paying significantly more NICs.
National Living Wage
The National Living Wage will increase by 9.7% next year to an hourly rate of £10.42, which represents an annual pay rise of more than £1,600 to a full-time employee.
R&D tax credits
The R&D tax credit is intended to support innovation for small and medium sized businesses but it will go down from 130% to 86% in April next year.
An increase to the Research & Development Expenditure Credit from 13% to 20% will benefit larger businesses.
Energy Bill Relief Scheme
The Energy Bill Relief Scheme for businesses will continue until 31 March 2023 and is then expected to be reviewed to provide more targeted relief.
Electric vehicles
Employees who privately use electric vehicles (EVs) provided by their employer currently pay tax as a benefit in kind (BIK) which is equivalent to 2% of the vehicle’s list price. After April 2025 this will increase to 3%, 4%,and 5% in the following tax years to 2027/28 and BIK will also increase on non EVs by 1% per year in the same period. Road tax will be payable on EVs from 2025 and is expected to be £10 for the first year and then the same as other vehicles in following years.
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