As we always do, we have monitored how the Chancellor’s Autumn Budget 2023 impacts the businesses we work with.
Nobody wants to comb through the full government document, so we’ve done that for you.
Here’s our accessible summary of how Jeremy Hunt’s latest offering will affect businesses big and small in the UK.
National Insurance cuts
Class 1 NI contributions by employees are reducing from 12% to 10% from 6 January 2024 and class 4 NI contributions by self-employed workers from 9% to 8% from 6 April 2023.
This is not extending to business’ own employer NI contributions and so it will not have a direct impact on finances. It will, however make slight improvements to employees’ take-home pay, which is certainly a positive for the financial wellbeing of your employees.
Small employers will also continue to get a NI holiday for taking on veterans. This has been extended by a year.
Full expensing capital allowance
This allows companies to deduct spending on new machinery and plant equipment from their taxable profits. It was introduced as a spur on investment and innovation this year and has now been made permanent.
This is good news for businesses who are looking to innovate or grow, whereby they can continue to claim 100% relief on their corporation tax on qualifying plant and machinery investments. It only applies to a small percentage of UK businesses, but is certainly a welcome development for those.
Business rates freeze
The current 75% business rates relief for eligible retail, leisure and hospitality businesses is being extended for a year until 2024/25 and the small business rates multiplier is being frozen for a year until 2024/25.
These measures will be most welcome in those sectors listed above.
It will be somewhat bittersweet for small businesses with premises, however. They will be pleased it is not increasing, however they will still be reeling from the significant impacts of the damaging previous increase. They may well have been hoping for the help for retail, leisure and hospitality to be extended. It could have been worse, but it could have also been better for small businesses on this point.
Freeport and investment zone extension
Freeports have had their tax relief extended from five to ten years and the investment zone programme has been extended from five to ten years.
The investment zones in the UK are:
- East Midlands
- Greater Manchester
- Liverpool City Region
- North East
- South Yorkshire
- Tees Valley
- West Midlands
- West Yorkshire
These have been centred around research and university bases with high growth potential. Various tax relief schemes are in place in these zones with the aim of catalysing private/public sector collaboration and growth.
The eight freeport areas in England are:
- East Midlands Airport
- Felixstowe and Harwich
- Liverpool City Region
- Plymouth & South Devon
The two green freeport areas in Scotland are:
- Inverness and Cromarty Firth Green Freeport
- Forth Green Freeport
The two freeport areas in Wales are:
- Celtic freeport
- Anglesey freeport
Again these zones are targeted towards import/export capabilities and high growth potential. They also benefit from tax and customs efficiencies.
The extension of this scheme is great news for businesses in those areas.
Alcohol duty freeze
Alcohol duty has been frozen until 1 August 2024. This is good news for hospitality businesses who have benefited from this post-Covid initiative.
Also good news for anyone who enjoys a tipple…
National living wage increase
The NLW has risen from £10.42 per hour to £11.44 per hour from April 2024 for those 21 and over.
This will have an effect on businesses who have living wage and low-wage workers. Their wage bills for NLW employees will increase.
Major developments’ planning decisions are set to be sped up, with the government enforcing planning fee reimbursements on councils who do not meet agreed timescales.
Housing developers and construction firms will be pleased with this announcement as they look to overcome backlogs.
£4.5 billion of funding has been made available for strategic manufacturing sectors: automotive, aerospace, life sciences and clean energy. This is available from 2025/26 for five years.
The UK has been doing much to promote these sectors and maintain their competitiveness against European and global counterparts and this announcement will be seen as a continuation of this. Many of these sectors have been hit hard by the energy price crisis and shortage of semi-conductors and materials in recent years. As key strategic sectors for the country, this investment is one of the core policies from the budget.
Merger of R&D tax relief for small businesses
The current R&D tax relief schemes have been merged. The new singular scheme launches in April 2024. To qualify, businesses must allocate 30% of their total expenditure to R&D. This has dropped from 40%.
Autumn Statement 2023: Conclusion
The overall view from most commentators is that this budget had more moving parts than was expected, however does little for the UK’s economic outlook in the short term.
Paul Johnson, Director of the Institute for Fiscal Studies, said: “Public finances haven’t meaningfully improved. The growth outlook has weakened. Inflation is expected to stay higher for longer. Higher inflation pushes up tax receipts by more than it pushes up spending on debt interest or social security benefits; but rather than use the proceeds to ease the ongoing ‘fiscal drag’ effects of threshold freezes, or to compensate public services for higher costs, the Chancellor opted to cut other taxes.”
There were some welcome business support measures in Jeremy Hunt’s 100+ point action plan. Many of which are extensions of previous schemes. But many of the measures were aimed at easing medium term issues.
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