Autumn Statement 2022: What small business owners need to know
Posted: Thu 17th Nov 2022
Chancellor Jeremy Hunt has announced his 2022 Autumn Statement, to which a panel of small business owners and experts reacted live.
Here's everything small business owners need to know about the announcements.
The Office for Budget Responsibility (OBR) believes the the UK is in recession. It predicts that overall growth this year will be 4.2% in 2022, but the size of the economy will decline by 1.4% next year.
There will be growth of 1.3%, 2.6%, and 2.7% in 2024, 2025 and 2026.
The UK’s inflation rate is expected to be 9.1% this year and 7.4% in 2023, while unemployment is predicted to increase from 3.6% to 4.9% in 2024.
The planned revaluation of business properties for business rates purposes will go ahead as planned in 2023, but to "soften the blow" a package of £13.6 billion over five years will help businesses to transition to their new bills.
Business rates multipliers will be frozen in 2023-24 at 49.9p and 51.2p, instead of the planned increases of 52.9p and 54.2p. The government said this means bills will be 6% lower than without the freeze, before any reliefs are applied.
A £1.6bn Transitional Relief Scheme will be introduced that will cap bill increases caused by changes in rateable values at the 2023 revaluation. The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023-24. The government said 700,000 businesses will be supported by this scheme over three years.
The Retail, Hospitality and Leisure (RHL) relief scheme will be increased from 50% to 75% for 2023-24, up to £110,000 per business. The Autumn Statement document said it amounts to a £2.1bn saving for around 230,000 business properties. It gave the following examples:
A typical small shop with a rateable value increasing from £20,000 in 2017 to £21,500 in 2023 will receive RHL relief worth around £8,000 (subject to the £110,000 cash cap per business).
A typical pub with a rateable value decreasing from £31,900 in 2017 to £27,600 in 2023 will receive RHL relief worth over £10,300 (subject to the £110,000 cash cap per business).
Full details about the business rates announcement is here.
Online sales tax
Following a consultation on introducing an online sales tax (OST), the government said it has decided not to introduce one.
The idea of an OST was put forward with the aim of rebalancing the business rates bills paid by physical retailers in comparison to online stores.
The Autumn Statement document said:
"The government’s decision reflects concerns raised about an OST's complexity and the risk of creating unintended distortion or unfair outcomes between different business models. Stakeholders also expected it would lead to higher prices for consumers."
Not introducing an online sales tax is something Enterprise Nation has previously called for.
Emma Jones, founder of Enterprise Nation, said:
"The tax may be applied to large platforms but an unintended consequence will be that the burden is passed to thousands of small firms using platforms to trade, so increasing the already rocketing cost of doing business."
Research and development development (R&D) tax relief
On R&D tax relief, the full Autumn Statement document said:
"...there is significant error and fraud in the small and medium-sized enterprises (SME) scheme, with the generosity of the relief making it a target for fraud."
For expenditure on or after 1 April 2023, the SME scheme will decrease from 130% to 86%, while the SME credit rate will decrease from 14.5% to 10%. The Research and Development Expenditure Credit (RDEC) rate, however, will increase from 13% to 20%.
Jeremy Hunt said:
"Despite raising revenue, the OBR have confirmed that these measures have no detrimental impact on the level of R&D investment in the economy.
"Ahead of the next Budget, we will work with industry to understand what further support R&D intensive SMEs may require."
Energy bills support
The government is currently supporting all businesses with rising costs by reducing energy bills through the Energy Bill Relief Scheme. That scheme is due to end in its current form on 31 March 2023.
The Autumn Statement said a Treasury-led review of energy support for businesses beyond 31 March will deliver its findings by 31 December 2022. The full document released after the speech said:
"While the government recognises that some businesses may continue to require support beyond March 2023, the overall scale of support the government can offer will be significantly lower, and targeted at those most affected to ensure fiscal sustainability and value for money for the taxpayer."
The Energy Price Guarantee for households will limit typical energy bills to £2,500 per year until April 2023. It will then rise to £3,000. The government said this equates to an average of £500 support for households in 2023-24.
For the most vulnerable, in 2023-24 a £990 additional cost of living payment will be provided to households on means-tested benefits, of £300 to pensioner households, and of £150 to individuals on disability benefits.
The dividends allowance, the point at which business owners who use dividends pay tax, will reduce from £2,000 to £1,000 in April 2023 and to £500 in April 2024.
This decision was revealed earlier this month and entrepreneurs criticised the move.
Capital gains tax allowance
The annual capital gains tax allowance, the amount of profit you can make from the sale of an asset before you are taxed, will be halved in 2023-24 and halved again in 2024-25.
It will be £6,000 and £3,000 for individuals and £24,600 and £12,000 for couples.
The government aims to raise £440m in 2027-28 with this change.
Employer’s National Insurance threshold
The employer’s National Insurance Contributions (NIC) threshold will be frozen at £9,100 until April 2028.
The move will raise £5.8bn for the government by 2028 and increase the amount businesses pay for each person they employ.
The employment allowance, which allows eligible employers to reduce their National Insurance liability, will be retained at £5,000.
The government said 40% of employers will not be affected by freezing the threshold for employer’s NIC due to the employment allowance.
The VAT threshold was previously frozen at £85,000 until April 2024. The Autumn Statement extends this until April 2026.
Freezing the VAT threshold has been described as a "stealth tax raid" on small businesses because it means more businesses will pay the tax as their turnover increases in line with rising prices.
National living wage and national minimum wage
The UK national living wage for people aged over 23 will increase from £9.50 to £10.42 an hour from April 2023. This is an increase of 9.7% and a rise of over £1,600 to the annual earnings of a full-time worker on the national living wage. It is expected to benefit over 2m low-paid workers.
The national minimum wage rates will change as follows:
rate for 21-22 year olds increase to £10.18 an hour (10.9% rise)
rate for 18-20 year olds increased to £7.49 an hour (9.7% rise)
rate for 16-17 year olds increased to £5.28 an hour (9.7% rise)
apprentice rate increased to £5.28 an hour (9.7% rise)
accommodation offset rate increased to £9.10 an hour (4.6% rise)
The threshold at which the top 45% additional rate of income tax is paid will decrease from £150,000 to £125,140 from 6 April 2023.
The income tax personal allowance and higher rate thresholds have been frozen for another two years, until April 2028.
The Autumn Statement confirmed the previously announced increase in the main rate of Corporation Tax. The rate for businesses with profits over £250,000 will increase from 19% to 25%.
Businesses with profits below £50,000 will pay a 19% small profits rate.
The government will remove import tariffs on over 100 goods for two years to help with rising costs faced by UK producers. Examples include aluminium frames used by bicycle manufacturers and ingredients purchased by food producers.
Vehicle excise duty
Vehicle excise duty will be introduced on electric cars, vans and motorcycles from April 2025.
The full document said "the tax system should continue to adapt to reflect consumer behaviour" and the change "will ensure that all motorists begin to pay a fairer tax contribution".
High growth businesses
Jeremy Hunt said he wants to make the UK "the world's next Silicon Valley" and "combine our technology and science brilliance with our formidable financial services".
Now the UK isn’t in the EU, the government will look to change EU regulations in "five growth industries: digital technology, life sciences, green industries, financial services and advanced manufacturing".
New work led by chief scientific adviser Sir Patrick Vallance will examine how to "change regulation to better support safe and fast introduction of new emerging technologies".
Hunt also said: "We will legislate to give the Digital Markets Unit new powers to challenge monopolies and increase the competitive pressure to innovate."
Bids for investment zones, announced in the mini-Budget by former chancellor Kwasi Kwarteng while Liz Truss was prime minister, have been dropped with the policy "refocused".
The Autumn Statement document said:
"The government will use this programme to catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths.
"The Department for Levelling Up, Housing and Communities will work closely with mayors, devolved administrations, local authorities, businesses and other local partners to consider how best to identify and support these clusters, driving growth while maintaining high environmental standards, with the first clusters to be announced in the coming months."
The second round of the Levelling Up Fund will allocate at least £1.7 billion to priority local infrastructure projects. Successful bids will be announced before the end of the year.
Jeremy Hunt announced "a new devolution deal that will bring an elected mayor to Suffolk", although Andrew Proctor, leader of Norfolk County Council, said the deal has not yet been concluded.
Hunt also said "deals to bring mayors to Cornwall, Norfolk and an area in the North East" will "follow shortly".
The government will deliver the Levelling Up White Paper commitment to sign new 'trailblazer' devolution deals with Greater Manchester and the West Midlands Combined Authorities by early 2023. This would devolve powers in areas such as skills, transport and housing. The full document said the deals "will act as a blueprint for other areas to follow".
Enterprise Nation's reaction: Small businesses drew little inspiration from the Autumn Statement
Writing in The Times, Enterprise Nation founder Emma Jones shared her reaction to the Autumn Statement. She said:
"The so-called Silicon Valley measures, which focus on the UK’s 30,000 scale-up companies, might help to power up this fast-growth sector, but what of the 4.1 million start-ups, early stage and micro businesses?
"They also need to know that the value they generate is understood and appreciated. I have lost count of the times that such companies have been referred to by politicians as the backbone of the economy but they barely got a mention in Hunt's statement."