Autumn Statement 2023: What small business owners need to know

Chancellor Jeremy Hunt has announced his 2023 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.

Business rates

The 75% business rates relief for hospitality, retail and leisure businesses up to a cap of £110,000 has been extended until 2025. The chancellor said it will save the average independent pub more than £12,800 in 2024.

The small business rates multiplier will be frozen at 49.9p. The government says this will benefit around 90% of ratepayers.

The standard multiplier (paid by properties with a rateable value of £51,000 or more) will be uprated by September's CPI in April 2024 (6.7%). This means an increase from 51.2p to 54.6p.

Hospitality and retail groups warned before the Autumn Statement that increasing the multiplier would be "disastrous" for businesses. They also called for the 75% relief to be increased to a £2m rateble value limit.

National Insurance

The chancellor announced cuts to National Insurance.

The weekly Class 2 National Insurance Contributions (NICs), the flat rate £3.45 compulsory charge paid by self-employed people earning more than £12,570, will be abolished from April 2024. The rate of Class 4 NICs on self employed earnings between £12,570 and £50,270 will be cut by 1p, from 9% to 8% in April 2024.

The government claims that these two cuts will benefit around two million self-employed people with the average self-employed individual on £28,200 seeing a saving of £350 in 2024-25.

The main rate of Employee National Insurance will be cut by two percentage points from 12% to 10% from January 2024.

Late payment

Alongside the Autumn Statement, the government published the results of its review on the impact of late payments on small businesses. Enterprise Nation contributed to the review and in the forward, small business minister Kevin Hollinrake said:

"Particular thanks go to Enterprise Nation for hosting a number of stakeholder events."

The review said overall payment times for some SMEs have reduced from 81 days in 2010 to 36 days in 2020/21, but 40% of invoices are still not being paid according to the agreed terms which means SMEs struggle or do not survive.

New measures aimed to tackle it announced by government include:

• The Reporting on Payment Practices and Performance Regulations 2017, which require large businesses, to report their payment practices to the government for publishing publicly will be extended.

• From April 2024, large firms bidding for central government contracts over £5m need to demonstrate they pay suppliers within an average of 55 days from April 2024. The aim is to make 45 days from April 2025 and 30 days "in the coming years".

• The powers of the Small Business Commissioner, who helps small businesses deal with late payment, will be broadened to enable the office to undertake investigations and publish reports on the basis of anonymous intelligence.

• The Small Business Commissioner's name will be changed "to more closely reflect the role". This is a point Enterprise Nation made as lots of founders believe the Commissioner's power extend beyond late payment and to all small business issues.    

• The Department for Business and Trade "will actively identify and contact businesses currently not fulfilling their payment reporting requirements" to remind them "of their responsibilities and given the opportunity to comply".

• An annual international and domestic policy summit will be set up for which the UK will invite countries that are taking action on addressing late payment and to share good practice.

• Government advice on late payment will be improved including a guide on how to negotiate payment terms with contract templates.

National Living Wage and National Minimum Wage

The National Living Wage will rise from £10.42 to £11.44 an hour in April 2024. The government says the 9.8% increase is the biggest ever rise and worth over £1,800 a year for a full-time worker.

Eligibility for the National Living Wage will be extended by reducing the minimum age to qualify for the pay rate from 23-year-olds to 21-year-olds. The government says for full time workers aged 21 this is a 12.4% increase and worth almost £2,300 a year.

The National Minimum Wage for 18-20-year-olds will increase to £8.60 per hour, a £1.11 hourly rise on the current rate.

The rate for 16-17-year-olds and apprentices will increase by £1.12 to £6.40.

Tax incentives for investors to back businesses extended

The Seed Enterprise Investment Scheme (SEIS), the Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCTs) provide investors with incentives to fund small businesses.

They are currently due to expire in April 2025 and there have been several demands, including by Enterprise Nation, to extend the schemes. The Autumn Statement confirms that the government will legislate to extend the schemes until 2035.

Full expensing made permanent

Full expensing, a tax scheme that allows incorporated companies to deduct 100% of the cost of capital equipment from their profits in the year it is bought, has been made permanent. It was due to end in March 2026.

Expanding the cash basis

The cash basis is a simplified method for calculating small business profits which is aimed at making it much easier for businesses to understand how their taxable profits have been calculated, reducing error and the likelihood of any unexpected tax bills. It is currently used by 1.2m businesses. 

The government says it will make the following changes:

• remove the turnover thresholds for businesses to use the cash basis.

• set the cash basis as the default method of calculating taxable profits, with an opt-out for accruals.

• remove the £500 limit on interest deductions in the cash basis, aligning the rules with accruals.

• remove the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.

Funding for high growth and scale-up businesses

The statement announced various funding schemes for scale-up and high growth businesses as part of the chancellor's vision to make Britain "the next Silicon Valley". They are:

• At least £50m additional funding for the British Business Bank's Future Fund: Breakthrough programme which encourages private investors to co-invest with government in high-growth companies.

• A Venture Capital Fellowship scheme, based on the US Kauffman Fellowship, to support the next generation of investors.

• New vehicles through the chancellor's Mansion House reforms aimed at helping pension funds invest the capital unlocked. It includes £250m to support successful bidders, subject to contract, under the Long-term Investment for Technology and Science (LIFTS) initiative, and a new Growth Fund for British Business Bank to give pension funds access to investment opportunities in "the UK's most promising businesses".

• £20m for universities to foster more 'spin-out' companies. The government has also accepted the recommendations of an independent review into boosting spin out companies led by Professor Irene Tracey and venture capitalist Dr Andrew Williamson.

Claiming training expenses

HM Revenue & Customs (HMRC) will "rewrite guidance around the tax deductibility of training costs for sole traders and the self-employed, to provide more clarity to business on what costs are deductible".

Alcohol duty

Alcohol duties have been frozen until 1 August 2024. The government will delay its annual uprating decision to the 2024 Spring Budget to give businesses time to adapt to the duty system introduced on 1 August 2023.

Help to Grow and Growth Hubs

Funding for the government's Help to Grow programme, which helps businesses increase productivity supported by mentors, will be extended beyond 2024/25.

Funding for Growth Hubs, which provide advice to businesses in England, will be provided in 2024-25.

Research and development tax relief

Following a consultation, the current R&D Expenditure Credit (RDEC) and SME schemes will be merged from April 2024 which the government says is aimed at "simplifying the system".

The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%.

The intensity threshold in the R&D intensives scheme will also be reduced from 40% to 30% for accounting periods that start on or after 1 April 2024, which the government says means around 5,000 extra SMEs will qualify for an enhanced rate of relief.

Making Tax Digital for Income Tax Self Asessment (MTD for ITSA)

From April 2026, those with annual income over £50,000 will be mandated to submit tax information digitally to the government, followed by those with income over £30,000 from April 2027.

A consultation was carried out to look at whether those with income under £30,000 should be covered by the mandation. It concluded not with the government keeping the decision "under review" to allow HMRC to closely monitor users' experience of MTD through public beta testing, ensuring this addresses the needs of all customers and that there is sufficient software provision for this section of the market".

The review also identified changes to MTD for ISTA aimed at simplifying the process.

Making Tax Simple, a report by Enterprise Nation and The Entrepreneurs Network supported by accounting software firm Intuit, found more than half of businesses with less than £20,000 in annual turnover said the use of digital accounting software led them to adopting other productivity-boosting technologies.

Inflation coupled with frozen allowances and thresholds (known as fiscal drag) means more businesses will now be dragged into the tax return bracket. The report highlights that not only does this add further complexity, it also acts as a brake on entrepreneurship with all the negative consequences that will have for the economy and society at large.

Digital adoption by businesses

The government will set up a taskforce to explore how SMEs can be supported in adopting digital technology to improve their productivity. The Department for Science, Innnovation and Technology recently backed the launch of Enterprise Nation's Tech Hub.

Enterprise Nation's reaction to Autumn Statement 2023

Daniel Woolf, Enterprise Nation's head of policy and government relations, said:

"The chancellor's Autumn Statement contained numerous concrete steps to support small businesses across the country. We are pleased to see that the government listened to our calls on key issues affecting small businesses.

"Measures to stamp out late payments are positive, with stringent payment time requirements for firms bidding on large government contracts. Cashflow is the lifeblood of a small business, so ensuring payments are made on time makes a real difference, and we are pleased that the government acted on our recommendation to this end, with Enterprise Nation's participation mentioned in the review. But, these measures only apply to firms bidding for government contracts over £5m, and small businesses will want to see the net widened to ensure the scourge of late payments are properly tackled.

"On business rates, small firms will be relieved to see the small business rates multiplier frozen for another year, along with the extension of the Retail, Hospitality and Leisure 75% relief. This helps alleviate a major fixed cost and is another key Enterprise Nation ask the government listened to.

"The decision to scrap the sunset clause for the Enterprise Investment Scheme and Venture Capital Trusts, pledging to extend them to 2035, is a welcome move that will give small businesses continued access to vital growth funding.

"We also welcome the continued funding for the Help to Grow Management programme. The advice and support these initiatives provide helps businesses increase productivity, access finance and fulfil their growth potential.

"The decision to abolish Class 2 and cut Class 4 National Insurance Contributions will benefit the self-employed. But, the sector will require more direct support to offset the impacts of the pandemic and implementation of the off-payroll working rules.

"Finally, the Department for Science, Innovation and Technology's pledge to work with industry to help more SMEs adopt digital technology is another positive step. Enterprise Nation stands ready to play our part in this aim, through our DSIT-backed Tech Hub consortium, which is already addressing this issue."