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Autumn Statement brings little comfort to hard-pressed small businesses

The Chancellor has kept his promise to prioritise financial stability and helping the most vulnerable members of society. However, in the middle of a recession, this statement will not grow business confidence. Businesses in Cambridgeshire will welcome support for business rates and the continuation of the employment allowance, but many smaller businesses will be impacted by the fall in the dividend allowance. The Government’s Energy Bill Relief Scheme expires on 31 March 2023 - when asked about their ability to pay their energy costs, almost half of businesses say they will have difficulty doing so. The sooner we get clarity on where future support will be targeted the better. It is encouraging to hear about plans to boost energy efficiency across the economy, but we need to see more urgency as businesses deal with increasing bills. Also, it is good news that Sizewell C will go ahead, and we’re relieved that HS2 has not really been cut any further. These projects will significantly boost regional economies while also improving our national infrastructure. The Government must do more to improve business conditions for investment and growth; otherwise we will be starting from a weak foundation to power our recovery once global economic conditions stabilise. The Chancellor’s Statement is light on green innovation, and it does nothing to address current labour shortages and to boost export-led growth. Lastly, we are pleased to see the East West Rail give importance to the OxfordCambridge Arc.

Vic Annells, Chief Executive, Cambridgeshire Chambers of Commerce

On Friday 18 November Mariana Garcia, Policy & Partnerships Executive at the Chamber, attended the Autumn Statement Webinar presented by the Tax specialists from Lovewell Blake Chartered Accountants and Financial Planners. Following the webinar Mariana spoke with James Rix, Manager at Lovewell Blake, to hear his view on the announcements. Lovewell Blake is a Chamber member and a firm of Chartered Accountants and Financial Planners with eight offices across Norfolk, Suffolk and Cambridgeshire. James is also a valuable committee member of the Ely & East Cambs Chamber. Prior to attending the webinar, James also discussed some of the changes announced on BBC Radio Cambridgeshire.

What does the Autumn Statement mean for your business?

Jeremy Hunt said that everyone would feel the pain in his Economic Statement; that is certainly true of businesses, and SMEs in particular. Given that they are the real engine of growth in the UK economy, he may find that attacking them on every front will not prove popular in the business community. Going into this Autumn Statement, small business owners had already been targeted with a significant increase in the rate of corporation tax from April next year and an across-the-board 1.25 per cent uplift in tax on dividends. The statement piled on the pain. Perhaps it wasn’t surprising that the Chancellor chose not to extend the ‘Super-Deduction’ beyond next March (the Annual Investment Allowance remains in place, extended to £1m), but the reduction in small business R&D tax relief announced in the statement effectively reduces tax relief on R&D for small firms from 230 per cent to 186 per cent. The 9.7 per cent increase in the National Living Wage will add cost for businesses, not just at the lower end, but with a knock-on effect right across the wage structure. Add to that the freezing of the employer national insurance threshold, and employing people is about to get much more expensive. Meanwhile, uncertainty about energy costs continues. The Chancellor acknowledged that bills are likely to remain high throughout 2023 by extending the residential energy cap for another year. But businesses received no such relief and will have to wait until the new year before they learn what – if any – further support they will receive after March. For those renewing energy contracts right now, that lack of certainty hardly helps. Meanwhile, business rate payers are facing big rises following the announcement that business premises revaluations will go ahead as planned next year. There will be some transitional relief, but this is sure to be another rising cost for businesses. Better news for those in the retail, hospitality and leisure sectors, who will see relief extended for another 12 months. The only silver lining is what the Chancellor didn’t do: no VAT increase, no rise in national insurance rates, and no rise to headline income tax rates. But this will give small comfort to hard-pressed small businesses. What is clear from the statement is that the Chancellor has accepted that high levels of inflation are here to stay for at least another 12 months, and there is little he can do about it. Sadly, it seems that businesses will have to resign themselves to a tough few months ahead. Lovewell Blake have summarised the points from the Autumn Statement into a one-stop guide of all the items that will affect either you, your business or both.

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TRANSFORM

Those points are Income tax rates, Income tax allowances, Dividends, NICs thresholds, Corporation tax rates, Capital allowances, Research and Development, Company Share Option Plan, VAT, Cost of living payments, Uprating of benefits, Raising the benefit cap, National Living Wage and National Minimum Wage uprating and In-work conditionality for Universal Credit claimants. Some of the key points for businesses and the accordingly breakdown can be found below.

Dividends

The government has also confirmed that, from April 2023, the rates of taxation on dividend income will remain as follows: • The dividend ordinary rate - 8.75% • The dividend upper rate - 33.75% • The dividend additional rate - 39.35%. As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75 per cent. In addition, the government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024. These changes will apply to the whole of the UK. In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25 per cent Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care. The Health and Social Care Levy Act provided for a temporary 1.25 per cent increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25 per cent Health and Social Care Levy. However, the government has: • Reversed the temporary increase in NICs • Cancelled the Health and Social Care Levy completely. According to the government, not proceeding with the Levy will reduce tax for 920,000 businesses by nearly £10,000 on average next year. For SMEs, the government predicts that the savings will be around £4,200 on average for small businesses and £21,700 for medium sized firms from 2023/24. In addition, it will help almost 28 million people across the UK save £330 on average in 2023/24, with an additional saving of around £135 on average this year. “The government are aiming for shortterm pain with long-term gains. Ultimately there are difficult times to come.” James Rix, Ely Office Manager for Lovewell Blake LLP

MORE DETAIL FOR EMPLOYEES AND EMPLOYERS

The changes took effect for payments of earnings made on or after 6 November 2022: • Primary Class 1 NICs (employees) generally reduced from 13.25% to 12% and 3.25% to 2% • Secondary Class 1 NICs (employers) reduced from 15.05% to 13.8%. The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53 per cent.

CORPORATION TAX RATES

It had been previously announced that the expected increase in the rate of corporation tax for many companies from April 2023 to 25 per cent would not go ahead. However, the government announced on 14 October 2022 that this increase will now proceed, and this has been confirmed. This means that, from April 2023, the rate will increase to 25 per cent for companies with profits over £250,000. The 19 per cent rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate. In addition: • Bank corporation tax surcharge changes will proceed, meaning that from April 2023 banks will be charged an additional three per cent rate on their profits above £100 million • From April 2023 the rate of diverted profits tax will increase from 25% to 31%.

CAPITAL ALLOWANCES

The Annual Investment Allowance (AIA) gives a 100 per cent write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur. Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses.

IN-WORK CONDITIONALITY FOR UNIVERSAL CREDIT CLAIMANTS

The government will bring forward the nationwide rollout of the In-Work Progression Offer, starting with a phased rollout from September 2023, to support individuals on Universal Credit (UC) and in work to increase their earnings and move off benefits entirely. This will mean that over 600,000 claimants on UC whose household income is typically between the equivalent of 15 and 35 hours a week at the NLW will be required to meet with a dedicated work coach in a Jobcentre Plus to increase their hours or earnings. The Autumn Statement sets out reforms to ensure businesses in the energy sector who are making extraordinary profits contribute more. From 1 January 2023, the Energy Profits Levy will be increased to 35 per cent and extended to the end of March 2028 and a new, temporary 45 per cent Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators. The Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000. The government is also setting a national ambition to reduce energy consumption by 15 per cent by 2030, delivered through public and private investment, and a range of cost-free and low-cost steps to reduce energy demand. More information can be found at https:// www.lovewell-blake.co.uk/news/theautumn-statement-2022 where you will find a full report of what was announced and find a link to watch a recording of the Autumn Statement Webinar. If you have any questions, please get in touch with James at j.rix@lovewell-blake.co.uk