The Chancellor of the Exchequer, Jeremy Hunt, delivered the much-awaited Autumn Statement to the House of Commons. This announcement, initially meant to be delivered in October, was pushed back by Prime Minister Rishi Sunak after the fallout of the September mini-budget.
The Autumn Statement covered details of a £54 billion package to fill a "black hole" in public finances. It was recognised well before Mr Hunt addressed MPs that the message would not be an optimistic one but rather one to prepare the public for the difficult times ahead.
In this article, we look at how the proposed measures from the Autumn Statement will affect businesses.
Back in March 2022, the Office for Budget Responsibility (OBR) projected an economic growth of 3.8% for 2022. Nevertheless, updated figures from the Autumn Statement show that the economy is now projected to grow by 4.2% overall this year. Initially forecasted to grow by 1.8%, GDP is now set to fall by 1.4% in 2023 and increase by 1.3% in 2024.
The government is committed to ensuring multinational companies pay the correct tax. As a result, the reforms developed by the OECD are being implemented, and the main rate for Corporation Tax will rise to 25% from April 2023.
From January 1st, not only will the energy profits levy increase from 25% to 35%, but a new temporary 45% levy on electricity producers will be introduced. This will enable the government to capture the extraordinary returns oil, gas, and some electricity generators have seen due to recent global events. The Chancellor emphasised these taxes should be temporary and not deter investment.
£14 Billion Business Rates Tax Cut
The Chancellor included in his statement that business rates should accurately reflect market values, "softening the blow on businesses" with an approximate £ 14 billion tax cut to business rates over the next five years. Around 700,000 businesses across the country are likely to benefit from this.
Transitional Relief Scheme
Further measures include a government-funded Transitional Relief Scheme, which will assist businesses in the revaluation process of their properties, starting in April 2023. The scheme will cap bill increases for those who will see higher bills as a result of the revaluation while simultaneously limiting bill increases for the smallest properties to 5%.
Capital Gains Tax
The statement also announced a reduction in the Annual Exempt Amount in capital gains tax from £12,300 to £6,000 in April 2023 and a further decrease to £3,000 from April 2024
In order to combat abuse of the R&D tax relief scheme, the SME R&D deduction will be cut from 130% of qualifying costs to only 86%. Loss-making companies will also see tax credits reduced from 14.5% to 10% of the surrendable loss.
National Insurance, Pensions and Wages
National Insurance thresholds for employer contributions will be completely frozen until April 2028. However, the Employment Allowance will be maintained at £5,000 until March 2026, allowing 40% of businesses not to pay any National Insurance Contributions.
Additionally, from April, the state pension will increase to £870, its highest-ever cash increase. Both state pension and pension credit will rise in line with inflation as the Chancellor vows to protect the Triple Lock of pensions.
Lastly, the National Living Wage will also rise in April 2023 to £10.42, up by 9.7%, representing an annual pay rise of £1,600 per year for those working full-time.
Stability, growth and hard decisions – these were the standout words from the Autumn Statement. While acknowledging his plan would "disappoint people", Mr Hunt promised to protect the "most vulnerable" and "make the recession we are in as short and shallow as possible".
We hope this snapshot has given you crucial information from the Autumn Statement, however, the government’s website provides full details if you’d like to see what else was announced by the Chancellor.
Header image by HM Treasury.