Autumn Budget 2023: What today’s budget announcement means for business owners and individuals

According to the policy set out by Rishi Sunak, the government intend to halve inflation by the end of 2023, whilst the current rate is twice as high as the 2% target from Bank of England. As of Wednesday 15 November, Sunak announced that this pledge has been delivered as the annual inflation rate fell to 4.6% in October.

The UK has faced an unpredictable and challenging period for its economy in the period of Sunak’s time as prime minister. International crises such as the Russia-Ukraine conflict have led to increased spending, higher levels of inflation, and supply chain complications. The numbers of Britain’s workforce have been affected by various factors during the recovery from the pandemic and changes to work visas as an aftermath of Brexit. The aftermath of which has presented a challenging period for British business owners and the self-employed, in a changeable economic landscape.

In the Autumn budget announced 22 October 2023, the Chancellor of the Exchequer Jeremy Hunt has laid out several measures aimed to support British business owners and individuals. These include cuts to national insurance, national living wage increases, frozen business rates, a 'full expensing' tax break, and planned investment in the manufacturing industry. 

National Insurance cuts

• The main rate of National Insurance will be cut from 12% to 10% as of 6 January, which will affect 27 million workers in the UK.
• Class 2 National Insurance, which is currently paid by those who are self-employed earning more than £12,570, is due to be abolished from April.
• Class 4 National Insurance, which is a payment on profits from between £12,570 and £50,270 is set to be cut from 9% to 8% from April 2024.
• A new National Insurance rate will apply to 21- and 22-year-old workers, changing from the current age which is those 23 and over.

National Living Wage increase

As of next April, the national living wage is due to increase to at least £11.44 per hour according to the budget announcement, targeting the two million lowest-paid workers across the nation. This was first announced on Tuesday but confirmed by the Chancellor in his statement today.

The national living wage is the lowest amount which workers aged 23 or over can be paid per hour according to the law, currently set at £10.42 an hour. This increase is likely a result of pressures from the cost-of-living crisis and a way in which the government can protect those most vulnerable at the lower end of the wage bracket.

Whilst beneficial for some employees, these changes may present a challenge to small business directors with concerns over increased wage spend. If this is the case, you may be able to re-adjust your budget to cater for increased allocation of payment in this area.

If you feel that this may result in increased pressure on your businesses, and would like to discuss potential options which can recover your business from insolvency, or alternatively seek to close your limited company if unlikely to recover from financial struggles, you can speak to one of our licensed insolvency practitioners today for a free and confidential consultation.

Business rates frozen

Business rates are due to rise according to consumer price inflation (CPI) in 2024, at an increase of 6.7% for business owners in April. Retail business owners struggling with the changing landscape of Britain’s highstreets can receive support through a business rate freeze. This measure to extend relief for business owners may provide some support for directors in the retail, hospitality, and leisure sectors in the face of rising business costs.

As of the announcement today, the business rates relief scheme, which is a 75% discount for business rates up to £100k in retail and hospitality firms, will be extended for an additional year. The measure will be vital for protecting the hospitality industry, as businesses such as pub owners, will need to manage increased National Living Wage bills.

A business rates support package has also been announced to support small businesses and the high street over the next five years, worth £4.3 billion. Retail, Hospitality and Leisure (RHL) relief is set to be extended. The standard business rate multiplier will be adapted according to CPI inflation, a result of which may mean some businesses can expect increased business rates bills. However, large retailers are likely to benefit from saving tax relief in accordance with the full expensing tax break.

Full Expensing Tax Break

The ‘full expensing’ tax break has been made permanent, in aims to encourage business investment. This policy allows companies to claim back all the money which has been invested in new equipment, including technology, plant, and machinery from business profits. The amount of expenditure which businesses can qualify for is uncapped thereby, the more which is spent on investment, the greater tax savings will be.

This tax break is set to increase annual business investment by around £3 billion a year according to the Office for Budget Responsibility (OBR). The aim of this being introduced is to support businesses to spend more on investing in new equipment and technology which will help business growth. Companies who will be affected by this are those within the charge to corporation tax who invest in their plant and machinery.

Investment in manufacturing industry

The government have also announced a £4.5 billion investment for manufacturing businesses, with a key focus on the automotive sector. These funds will be available from 2025 over a period of 5 years. £2 billion will be allocated to the car industry, £975 million for aerospace and an estimated £960 million for clean energy. With this announcement today, the government have set out plans to prioritise green manufacturing and services which will be key for the future of the UK economy.