The delayed autumn budget has been the topic of much speculation over the past few weeks – and although we expected many of the announcements, we now have clarity over the changes being made and when they will take effect.
Chancellor Jeremy Hunt worked through a series of statements affecting everything from payroll costs to public services and dividend income.
In this guide we summarise all the major announcements and provide a brief overview of how these may impact your finances or business.
Income Taxes, Payroll and National Insurance
Most of the changes around employee pay and employment costs come into effect from April 2023 or concern freezing tax bands:
- The National Living Wage will rise from £9.50 to £10.42 for employees over 23 from next April.
- Additional rate taxpayers will now pay 45% against income from £125,140, reduced from £150,000, meaning that higher income earners will fall into the extra 5% bracket sooner.
- Allowances on tax, including the annual personal tax allowance, threshold for higher rate income tax and National Insurance thresholds, will be frozen until April 2028.
- Employer’s NICs will also be frozen until 2028, although employment allowances will be retained at £5,000.
Other changes will impact directors and company owners. Capital Gains Tax allowances will reduce from £12,300 to £6,000 next year. This freeze is coupled with a cut to the dividend allowance from £2,000 to £1,000 in 2023 and further to £500 from April 2024.
Support for Living Costs
Along with announcements about State Pension benefits and other income support, local councils will continue to be be restricted on the percentage by which they can increase residential council tax charges.
There is an annual maximum of 5%, although this is currently 3%, so there is a potential to pay greater rates than currently, increasing year on year.
Residential homes will still receive the energy price cap after April 2023, although the upper limit will be £3,000 per year rather than £2,500.
However, amid the talk about rising energy prices, there may be an opportunity for energy-efficient businesses. The government is set to double investments to reduce energy reliance by 15% by 2030. However, we have yet to determine what that will look like or whether new schemes will be announced that businesses can opt into.
The Chancellor promises £6 billion of funding to support greater energy efficiency from 2025 onward.
Unemployment is expected to increase to 4.9% in 2024 from 3.6%, meaning retention strategies and job security may become more crucial to workforces.
VAT thresholds, like many others, have been frozen until 2026, with measures to tackle tax evasion and avoidance expected to raise £2.8 billion of treasury income, making it crucial for companies to ensure they are fully compliant.
Following on from our recent articles advising of new areas of focus for HMRC investigations, this investment in tax audits may mean that expediting a review of your tax compliance measures is a priority.
One of the few areas to remain relatively intact is investment in research and development. Public funding has been protected and will be increased in 2024-2025. The Chancellor indicates that, despite cuts to R&D tax reliefs and credits, the government will work to identify ways to support small and medium companies that demonstrate innovation.
Business rates will drop, with 700,000 qualifying retail, leisure and hospitality companies expected to benefit from a £14 billion reduction on the rates currently imposed by local councils.
Rates multipliers used to calculate business rates will also be frozen from 2023-24, with rates capped at the 2023 valuation rate.
Import tariffs will also be stripped from over 100 commodities and products, making it cheaper to import raw materials and other items used in UK manufacturing.
The Impact of the Autumn Budget on UK Businesses
This budget was never expected to bring positive news on the back of a disastrous market reaction to the previous mini-budget and the recent announcements of reducing GDP and recession.
However, some statements may prove advantageous to businesses, particularly those that benefit from reduced business rates or that import from overseas.
No changes have been made to Corporation Tax rates, previously confirmed as rising to 25%, although with tapered relief for smaller companies – many smaller organisations will continue to pay tax at the pre-existing 19% rate.
The outcomes are primarily that everybody will pay more tax, albeit temporarily, while the government recoups national finances and addresses 'black holes' in the economy.
For now, the hope is that this range of tax freezes and cuts to allowances will tackle inflation, bring the economy back into a growth position, and reduce recession as far as possible.
It is essential to get to grips with all these changes and what they mean for your finances and business as quickly as possible – not least because the optimal salary and dividend payments and other tax-efficiency calculations will soon need to change once again.
An increase in the National Living Wage, household support payments and Universal Credit will certainly be welcome news for millions of families – but balancing budgets, reviewing forecasts, and addressing cash flow projections is now the biggest priority for UK businesses.
For more advice about how the autumn budget affects you, please get in touch with SAS at your convenience for a confidential chat.
We are also due to be at Loofers in Colchester on Tuesday, 6th December, from 10 am if you would like to join us to discuss the implications and the best steps to prepare for the months ahead.