The Chancellor's Autumn Statement 2023 has unveiled several pivotal changes that will significantly influence the landscape for small businesses. These updates encompass a range of areas, from tax incentives to wage adjustments, each carrying its own set of implications for the way small businesses will operate in the upcoming fiscal year.

Full Expensing for Business Growth

· Full Expensing will be made permanent, allowing limited companies a 100% write-off on qualifying expenditure on most plant and machinery. This does not apply to sole traders and partnerships.

· The Annual Investment Allowance will remain at £1 million per 12-month period.

Business Rates Relief

The small business multiplier will be frozen for another year, and the 75% Retail Hospitality and Leisure relief will be extended for 2024/25.These announcements are a welcome development, especially against the backdrop of escalating operational costs. This relief will see a decrease in business rates for small enterprises, providing much-needed financial relief and helping to buffer against economic pressures.

Adjustments in National Insurance Contributions

· Employees: Class 1 NICs rate is cut from 12% to 10% from 6 January 2024.

· Self-Employed: Class 2 NICs (Flat rate of £3.45 a week in 2023/24) will be abolished from April 2024. Class 4 NICs will be reduced from 9% to 8% on profits between £12,570 and £50,270. Contributions on profits above £50,271 will continue to be calculated at 2%

· Self-Employed Pensions and contributory benefits: Are currently provided to the self-employed by payment of Class 2 NICs. From 2024/25 those with profits above £12,570 will continue to receive access to contributory benefits including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs. Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. The weekly rate they pay will be frozen at £3.45 for 2024-25

· NICs Relief for Hiring Veterans: Has been extended until April 2025, providing no employer NICs on earnings up to £50270 for the first year of civilian employment of qualifying veterans

National Living Wage Increase

National Minimum Wage
	NMW rate from 6/4/2024	Increase £	Increase %
National Living Wage (21 and over)	£ 11.44	£ 1.02	9.8%
18-20 Year Old Rate	£ 8.60	£ 1.11	14.8%
16-17 Year Old Rate	£ 6.40	£ 1.12	21.2%
Apprentice Rate	£ 6.40	£ 1.12	21.2%
Accommodation Offset	£ 9.99	£ 0.89	9.8%

The increment in the National Living Wage presents a dual scenario. While it aims to bolster the living standards of workers, small businesses will need to recalibrate their financial strategies to accommodate higher wage expenses.

Changes to Cash Basis Accounting

The Autumn Statement introduces significant changes to cash basis accounting, a method often employed by small businesses for its simplicity. Notably:

● Default Method Shift: In a reversal of the current position where accruals is the default, cash basis accounting is now set as the default method, with businesses having the option to opt out for accruals. This change simplifies accounting for many small businesses.

● Removal of Turnover Threshold: The turnover threshold for businesses to use cash basis accounting will be removed. This broadens the eligibility, allowing more businesses to adopt this straightforward accounting approach.

● Interest Deductions Cap Removed: The previous £500 limit on interest deductions in cash basis accounting is now lifted, offering greater flexibility in financial reporting for businesses with significant interest expenses.

● Eased Restrictions on Loss Relief: The restrictions on using relief for losses incurred in cash basis accounting are also being removed. This change offers more breathing room for businesses recovering from financial setbacks.

Strategic Considerations for Businesses

With these changes, businesses will need to consider how they will adapt to these changes. At Intellitax, we help small businesses navigate such transitions. Please get in touch if you have any questions.

Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. We recommend individuals and companies seek professional advice on their circumstances and matters.

Autumn Statement 2023: Key Implications for Small Businesses