Autumn Statement recap: Key takeaways for SMEs
Chancellor Jeremy Hunt unveiled the Government’s Autumn Statement back in November 2023, laying out his roadmap to steer the UK economy through the coming months. For small business owners, understanding the implications of these changes is crucial for navigating the evolving economic landscape. We’ve outlined a breakdown of the key takeaways to be aware of below:
1. Full Expensing: A Permanent Fixture
The first significant development was the full expensing scheme being made permanent. Introduced in April 2023 to replace the super deduction scheme for small businesses, full expensing was initially slated to last three years. However, following the recent budget the Chancellor has now made this a permanent relief.
This policy allows a business to deduct the amount it invests in IT, plant, or machinery equipment immediately from its profits, as well as providing a 25p in every pound saving on other forms of investment it makes. The measure was announced as a policy catered towards bolstering company incentives for investment and has been welcomed by peers across sectors.
2. R&D Tax Credits: Streamlined and Extended
To further support firms investing in their growth, the Chancellor also announced the merger of two existing R&D schemes, SME and RDEC, into a unified scheme applicable to firms of all sizes. Loss-making companies under the new scheme will now benefit from a reduced tax rate of 19%, as opposed to a standard corporation tax rate of 25%. In addition, ‘R&D intensive’ requirements – which allow R&D intensive businesses to claim an enhanced credit of £27 for every £100 of R&D spent – will be lowered from 40% of total business spend on R&D to 30%, which the Government claims would benefit more than 5,000 SMEs.
3. Small Business Rate Multiplier Freeze Extended
There was additional good news for businesses in retail, hospitality, and leisure as the Chancellor unveiled measures, with the 75% discount on business rates being extended for another year, providing continued relief for firms in these sectors.
The extension will mean that businesses across these sectors will continue to receive a 75% discount, worth up to £110,000 on their business rate bills over the next year. The freeze on the small business multiplier has also been extended for a further year – however the standard multiplier will continue to rise, meaning firms with a property with a rateable value of £51,000 or more will have their rates bills increase by 6.7% next April.
4. National Living Wage Changes and National Insurance Tax Cuts
In a move to better support workers, the National Living Wage is set to rise from £10.42 to £11.44 per hour, with the age eligibility reduced from 23 to 21 starting 1 April 2024. This adjustment will impact payroll costs for businesses employing staff or third-party workers.
A 2% reduction in National Insurance Contributions for employees is also due to come into effect and translates to more take-home pay, starting from 6 January 2024. This cut is projected to benefit 28 million people, with significant potential annual savings for employees.
Furthermore, from 6 April 2024, self-employed individuals with profits above £12,570 will no longer be obligated to pay Class 2 National Insurance Contributions and will retain access to contributory benefits.
For businesses, particularly smaller firms, it will be important to review how the increase in payroll will impact monthly outgoings moving forward. Planning ahead and understanding where there may be crunch points will be important to ensure the new increases can be met from January and April respectively.
5. Addressing Late Payments: A Shift in Dynamics
With the Government estimating small businesses are owed millions of pounds in unpaid invoices, the Chancellor announced measures earlier this year to bring in methods for prompt payment to businesses.
In his speech, the Chancellor highlighted the recent introduction of the Procurement Act this year, which will mandate companies supplying the public or utility sector to now be paid within 30 days.
Efforts to tackle late payments will now also involve new measures requiring companies bidding for large government contracts to demonstrate payment of their invoices within 55 days, gradually reducing to 30 days by April 2024.
For SMEs, this will mean that if a business’ customers are companies with contracts supplying the Government, then they will be required by law to pay them within 30-days.
6. Boosting support for apprenticeships in UK business
To better support the training of apprentices across the UK in sectors contributing to economic growth such as engineering and manufacturing, the chancellor has also committed a generous £50 million for apprenticeships in a new, two-year pilot, starting in Spring 2024.
The new funding will be used to create more opportunities for training and to break down barriers which may have previously prevented employers from offering high-quality apprenticeships. The move is a welcome step to further encourage the development of new, young talent.
Back in July, Close Brothers was delighted to announce it was partnering again with the University of Sheffield AMRC Training Centre to fund up to a further 20 apprenticeships through the Close Brothers SME Apprentice Programme. You can find out more here: AMRC partnership 2023 | Close Brothers Group.
For small business owners, staying informed about these changes is key to adapting and thriving. For further details on any of these initiatives, you can visit the Government website on https://www.gov.uk/browse/business for comprehensive information and resources tailored to your business needs. Keep a close eye on updates and consider seeking professional advice to navigate these changes effectively.