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News: Chancellor Jeremy Hunt announces Autumn Statement 2023
As we enter the final month of the year, the UK government have unveiled their Autumn statement which announces their plans for spending and tax for the year ahead. This blog will explore what exactly the Autumn Statement is, what the 2023 Autumn Statement has announced and how it affects you as a small business owner.
What is the Autumn Statement?
The Autumn Statement is a pre-set plan for how the government will spend their budget for the year ahead, including details of spending on public services such as the NHS or the DWP. It also sets out plans for taxation, which affects the take-home pay and household budgets nationwide.
- Key terms explained: What are inflation, interest rates and recession?
- Inflation and recession: how to make your small business survive.
What challenges are being faced by the UK Economy right now?
The UK economy faces a few key challenges right now:
- Inflation is still high, in October it was 5.6%.
- Growth has stalled due to constant raises to interest rates
- The government is borrowing a lot of money and a lot of this money has a huge borrowing cost.
The general consensus of the statement is that Chancellor Jeremy Hunt has introduced plans to aid the recovery from these three issues. An independent body called the Office for Budget Responsibility will check whether the government’s plans will in fact aid or hinder UK growth.
What did the Autumn Statement announce?
There were many additional announcements in the Autumn statement but we have a round-up of the ones which will affect you directly as an SME owner.
OBR reports a drop in inflation by next year
The OBR forecasts that inflation will drop to 2.8% by the end of 2024, however, the 2% target may not be met until 2025.
Minimum wage to rise
Jeremy Hunt confirmed that the national minimum wage will rise to £11.44 per hour for those 21 and above. This is the first time 21-22-year-olds will be paid the higher wage, usually, the cut off is from 23.
This will directly affect you if your small business has employees. As a business owner, you will have to review your employee’s wages and make sure they are aligned with the national wage requirements.
Tobacco and Alcohol Duty
Hunt increases duty on hand-rolled tobacco by an extra 10%, however, he freezes the duty on alcohol until August 1st.
This is good news for bars, restaurants and pubs. However, this can have a negative effect on store owners as the price of tobacco will go up.
£50 million fund for apprenticeships
Hunt announces that £50 million will be used over the next two years to increase the number of apprenticeships in engineering and ‘other key growth sectors’.
This may be useful for SME owners who want to take on apprentices or use the apprenticeship scheme currently.
Additional £500m funding for the AI Sector
The AI sector is expected to receive a funding boost of £500 million over the next two years in order to transform the UK into an ‘AI powerhouse’.
If your company creates AI or works adjacent to those who do, i.e. you are a PR firm with an AI company as your client, this will have a positive impact on your business and may open up your business to some funding.
£4.5bn set aside for manufacturing
Hunt has committed to setting aside £4.5 billion for the manufacturing sector from 2025 to 2030, This is in order to boost our aerospace, life sciences (such as medical research) and green industries.
Class 2 NI to be abolished
The chancellor is moving to abolish the Class 2 NI tax for self-employed people, this can save entrepreneurs an average of £190 a year. Now self-employed people earning more than £12,570 a year will pay a flat rate of £3.45 a week.
Business tax break is now permanent
Here to stay is the tax break businesses receive from investing in IT, machinery and equipment. For every £1 a business invests in these goods and services, you are able to receive a 25p tax break.
This is a huge benefit for companies which heavily invest in equipment and tech, such as manufacturing companies.
Continuing the freeze for business rates.
The government will continue to freeze the small business multiplier for a further year- meaning small businesses will pay lower business rates for this financial year. They will also extend the 75% discount on business rates up to £110,000 discount for hospitality businesses. This may take the pressure of those worried about the rise in minimum wage.
Hint says this motion can save the average independent pub up to £12,800 a year.
National Insurance rate cut from 12% to 10%
The employee NI rate will be cut from 6th January onwards to 10%. Hunt says that usually this measure would be brought in in April at the start of the tax year, however, this will be introduced as urgent legislation to help 27 million workers see a benefit from the new year.
How does the Statement affect you?
Hunt has remarked that this Autumn Statement is one for ‘growth’. Thousands of people will see the benefits of certain motions such as the NI tax cut. However, the rise in minimum wage will increase the already tight margins for many small businesses, which are already affected heavily by high energy prices and the continued high rate of interest.
Some industries such as manufacturing, AI and tech, sciences and green industries have a lot to benefit from. The addition of funding from the government can translate into an increase in funding for businesses within these sectors.
Small businesses nationwide will welcome the continued freeze of business rates and the hospitality industry will benefit from the extended 75% discount.