What does the Autumn Budget mean for small firms?

November 18, 2022

On Thursday, the new Chancellor Jeremy Hunt laid out his plan to grow the economy and restore some of the UK’s credibility on international markets. 

The Autumn Budget includes billions of pounds of tax increases and spending cuts as the Chancellor tries to address a large gap in public finances.

But what does it all mean for the nation’s small businesses and self-employed workers?

Rising National Living Wage

From April 2023, the National Living Wage for over-23s will increase from £9.50 per hour to £10.42 per hour.

This will benefit low-wage workers but could put additional pressure on employers at a time when many are already struggling with sky-high costs.

Freezing Employer’s NICs threshold

The threshold for Employer National Insurance will be frozen until 2028. This means increasing salaries will be even more expensive for employers.

However, the government will keep the Employment Allowance at its new, higher level of £5,000.

Income tax thresholds

A freeze on income tax thresholds until 2028 means that millions will pay more in tax.

Additionally, the threshold for the top rate of tax will fall from £150,000 to £125,140, meaning that top earners will pay even more.

Dividend allowance cut

The tax-free dividend allowance will be cut from £2,000 to £1,000 in April 2023. It will be further reduced to £500 in April 2024.

This change will affect anyone that receives income from dividends but will be a bitter blow to company directors that take a portion of their income in dividends.

The Federation of Small Businesses calculated that a company director earning £40,000 per year would be £500 worse off than an employee earning £40,000 per year as a result of this change.

Capital gains tax allowance cut

The tax-free allowance for capital gains tax will also be cut significantly, from £12,300 to £6,000 in April 2023, and to £3,000 in 2024.

Capital gains tax is a tax on any profit generated when you sell an asset. Reducing the amount to £3,000 will mean that more people pay capital gains tax for the first time.

It could also affect landlords and second homeowners who might have to pay higher taxes on property sales.

Scaled-back energy bill support

The Chancellor confirmed that the Energy Bill Relief Scheme for non-domestic customers would continue beyond April 2023 but said that help would only go to certain businesses. 

He said that any support will be “significantly lower and targeted at those most affected” and that businesses will find out if they’re included before the end of 2022.”

Reducing research and development tax credits

Following reports about abuse of the R&D tax relief scheme for small businesses, the Chancellor announced plans to reduce the SME deduction rate from 130% to 86% and the credit rate from 14.5% to 10%.

However, the Chancellor also pledged to increase the separate R&D expenditure credit to 20% from 13%.

For more information about the budget and how it will affect your small business, get in touch with a member of our team here or call: 0808 281 0303.